Let’s blame Uncle Sugar for lower corn prices the last few days.
USDA released its revised Crop Production numbers March 10, and the news was mixed. (Link opens .pdf of 3/10/10 report.)
The results were negative. We have anticipated this revision with some hope that the corn crop size would be reduced. Thank God for small green apples! In this case, they were very small and very green.
The revision came because at the time of the January Inventory Report, there were still a lot of acres of corn and soybeans uncut. The delayed harvest for corn was mostly in Illinois, Michigan, Minnesota, and Wisconsin. The beans were still out in Georgia, North Carolina, South Carolina, and Virginia.
So, the good news, if you didn’t live in those states, was that the crop was cut from 13.151 billion bushels to 13.131 billion, as USDA included revisions in the Supply and Demand Report.
The beans were cut from 3.361 billion bushels to 3.359 billion. Not much change, but in the right direction. Still record crops.
Bigger carryover
Now, the bad news. USDA is now saying that carryout at the end of the crop year will be just under 1.8 billion bushels, actually 1.799 billion. That is up from the 1.719 they estimated just last month, and up from 1.673 billion at the end of the ’08-’09 crop year.
It doesn’t seem like much, but it is the worst category of number to be raised.
This is a number that hangs over the market all year, with all the buyers knowing there is no reason to get hungry. To put it in perspective, it is the highest ending stocks of 12 years. That cannot be a good thing.
Hurt by slow exports
The carryout is being hurt by the slow export pace. USDA had been projecting 2 billion bushels leaving home, but they cut that 100 million bushels in this report.
Exports have been running 6 percent behind projections, so they are preparing for the original guess to be wrong.
Market reaction
May corn futures have been volatile as lack of news, then mixed news hit the markets. The contract low was made Feb. 5 at 3.59. By the first of March, we had bounced 33 cents to 3.92, but it did not last long. We trailed lower for several days, then put in a low again the day after the new USDA report.
That low was at 3.61-1/2, almost back to the contract low.
Planting intentions
We have been looking forward to two things this month — the revision in crop size and the Planting Inventions Report out March 31. The first did not work out, so cross your fingers for the second.
Only smaller acres can help this crop right now. With big acres, only poor production can help prices later, unless there is unanticipated demand.
Hurting the chances for smaller corn acres are two unresolved factors.
First, there is the matter of unplanted wheat. Acres that did not get planted can be presumed to go to another crop. In the eastern Corn Belt, that means corn or beans.
Then, there is the matter of large acres coming out of expiring CRP contracts.
So, it is getting harder to imagine a scenario where we are surprised by smaller corn acres.
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