Better-than-expected early harvest yield reports, a larger-than-expected old-crop carryover, weak ethanol prices, and declining wheat prices have all combined to pressure corn over the last few weeks. Under this atmosphere, the U.S. Department of Agriculture's October 12 monthly crop report and supply/demand updates for U.S. and the world are highly anticipated.
After strong early fall yield reports from the central Midwest, corn yields have been a bit more mixed as harvest has progressed. But the trade's expectations remain for a higher output of 13.458 billion bu. (up 150 million from last month), with average U.S. yield of 157.7 bu. per acre. We aren't as optimistic, with a projection of 13.36 billion vs. last month's 13.31 billion estimate, due to reduced acres of 400,000-500,000 from spring planting delays and other factors likely to surface when the FSA's insurance data is incorporated this month. Regionally, the ECB yields might be up the most (1.8 bu.) to 162.7, the WCB's average yield might rise 1 bu. to 163.8, and the Southeast and Delta won't change much this month.
Last month's higher corn carryover is also keeping many cautious about 2007/08 demand levels, but last month's higher hog numbers (2.8%) and poultry slaughter running 2%-3% higher than 2006 suggests feed demand could be left unchanged. Sluggish ethanol prices and rumors of more bio-refinery construction slowdowns could prompt another 100 million cut in this year's biofuel demand. However, this year's record export sales pace of 850 million bu. by Sept. 27 suggests this demand could be boosted 100 million-leaving the 2007/08 demand base at 12.79 billion, and keeping this year's ending stocks at 1.89 billion bu. vs. trade talk of over 2 billion bu. circulating.
Given these supply/demand numbers, corn isn't likely to be the CBOT price leader like last year. However, its downside could be limited to the $3.25-$3.35 range, basis December, due to trade concerns about drier Brazilian weather slowing bean plantings or a smaller Australian wheat crop resurfacing. Because of this situation, livestock feeders and end users should have their feeding needs covered until March within this range. Producers should hold sales for a post-harvest price recovery back toward the recent highs later this fall.
The information contained in this report reflects the opinion of NARMSinc and should not be interpreted in any way to represent the thoughts of R.J. O'Brien, any of its affiliates, nor any of its employees. Futures and commodities trading involve significant risk and may not be suitable for every investor. Information contained herein is strictly the opinion of its author and is intended for informational purposes and is not to be construed as an offer to sell or a solicitation to buy or trade in any commodity or security mentioned herein. Information is obtained from sources believed reliable, but is in no way guaranteed. Opinions, market data and recommendations are subject to change at any time. Past results are not necessarily indicative of future results. Charts are developed by NARMS from USDA, other public data and proprietary models unless otherwise noted and credited.
