Market Matters Blog
Pat Hill DTN Markets Editor

Thursday 03/11/10
Reports Post-mortem

USDA's numbers, while outside the ranges of pre-report estimates in some instances, didn't prompt any sea changes in attitudes among analysts we looked at Wednesday evening, but several did had some interesting insights.

Here's a sampling of the sentiments, in no particular order -- representative of those analysts, and not necessarily in line with DTN's analysis.

Rabobank

"In Rabobank's view, little has changed in the fundamentals to suggest that the relatively benign grain and oilseed markets of recent months will come under any bullish pressure prior to spring plantings.

"Revisions made today only add to bearish supply-driven markets in the world's major grain and oilseed markets.

"There remains ample land to plant both corn and soybeans this season, with winter wheat acreage shrinking to a 97-year low, so we are not expecting a battle for acres or a spring planting rally unless conditions cause severe delays. Delays do not always correspond with lower final production figures."

Ag Resources

"A consequential rise in U.S. corn end stocks and a 3.8 MMT increase in Argie corn production to 21.0 MMTs (775 Mil Bu) underscores the challenges facing U.S. corn export demand. Flat price rallies in U.S. corn values will exacerbate an existing uncompetitive Gulf price structure. ARC sees exports being whittled down by another 75 Mil Bu going forward to 1,825 Mil Bu.

"... the entire question of yield/GMO seed is being reconsidered following the record large Argentine corn yields and huge Brazilian soy crop that is being gathered. Even in the U.S., the GMO yield kicker was evident in 2009 with record corn/soy yields under less than favorable growing conditions.

"The point is that the world holds adequate to surplus supplies of soybeans and wheat, and that new crop U.S. corn seeding will rise this spring to the 2nd largest on record. Extra acres are not needed. Unless dire weather threatens a major producer's crop, short covering rallies offer sales opportunities with the bearish price tail to extend for 18-24 months as world demand catches up."

Allendale

"We now have two bearish pieces of news this market has had to deal with in the past five days. 1) Ethanol prices have decoupled from unleaded gas (RBOB). Instead of rallying with unleaded, it is now falling. That is bearish to corn. 2) USDA's report today was disappointing to old crop. Countering that issue is the fact the new crop information is neutral to positive. We have made it clear that corn MUST get acres in order to meet demand from September 2010 to August 2011. While this market may now have another 15 cents of downside in it, we cannot say the picture has suddenly changed. There is a need for short term protection of old crop corn for producers but we do not see that need past planting."

Brock

"The chart picture for corn futures continues to look weaker and weaker. Most-active May futures today [Wednesday] fell through the support line across the September and February lows on their daily price chart. A May close below $3.60 will further increase the downward technical pressure on the market. The market may find some substantial support at the $3.50 level, but we anticipate an eventual drop back to the September low of $3.25 and probably the market's bear-flag objective of $3.15. Dec. futures have nearby chart support at $3.90-$3.91 1/2 with further support at $3.83 1/4. We expect Dec. to head for long-term support in the $3.46-$3.52 1/2 range over the next several weeks. Dec. futures will have to push back above moving average resistance in the $4.00-$4.05 range to substantially improve their chart picture."

Ontario analyst Phillip Shaw

"[USDA] moved the goalposts back then [in the January report] and in their March 10 report they solidified them. That cool and cold summer last year that caused so many quality issues in the US corn crop obviously had the other effect too. With the national corn yield of 164.8bu/acre and with many weather prognosticators talking about a rerun of 2009 maybe all bets are off going forward.

"It makes me think about a 90 million acre planting number for corn, with harvested acres taking yield on the trend line up to 13.5 billion bushels for next year. Corn usage is sitting at 13.015 billion bushels, which is down slightly because our American friends had 100 million bushels less to export. We need to get these bulls running again. One production hiccup will upset this whole corn bandwagon."

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Posted at 8:38AM CST 03/11/10 by Pat Hill
Comments (4)
The most dangerous comment is the last line of Phillip Shaws observation. It is the equivalent of betting on the come or putting your money on red No.3, given the accumulation of data we are witnessing. Frankly, it's a miracle corn and bean prices are where they are. Thank our benefactors, the hedge fund people who are anticipating inflation. I've been through this before, we are headed for stagflation, a condition where our inputs, controled by small cartels of suppliers, continue to go up and our product price stagnates or slowly erodes because of abundant supplies. We have been sheltered somewhat by low interest rates which have allowed farmers to again borrow against land equity to subsidize money losses in all livestock enterprises. Last falls corn drying bills were a surprise not included in most farmers production cost budgets. Part of the reason so little corn has been marketed at this point in the year, compared to previous years, is because so many farmers are waiting to cover cost of production that they hadn't anticipated. But this corn will come to town. Will it be orderly? Who knows, but passed experience is not reassuring.
Posted by Roger Luckow at 10:32AM CST 03/11/10
If the open interest in corn futures during the past few days is any indication of market sentiment, and I think it is, the 'specs' are as reluctant to go short at these prices as any other class of trader. It's been a bit surprising to me that we haven't seen an increase in corn futures open interest in conjunction with the recent pullback in prices, indicating the pressure has come from new,willing sellers. Instead, the steady to falling OI suggests it's just been a modest exit of positions by longs and shorts. The other thing that surprised me is post-yesterday's report is how nobody has mentioned that global carryout on Corn is still forecast to be 6 mmt lower this year than last year... despite yesterday's 6 mmt increase. Yes, feed an food grain supplies are plentiful, everybody knows that by now, yet nobody seems willing to send prices to new fresh lows. Markets that shrug off bad news deserve respect...
Posted by ken morrison at 11:33AM CST 03/11/10
Actually, DTN Contributing Analyst Alan Brugler made that very point about corn global carryout in his analysis for DTN subscribers yesterday -- that global stocks/use ratio is now 17.3 percent, vs 18.8 percent at this time last year. [in "World Corn Surplus Still Shrinking" in DTN AgNews]
Posted by Pat Hill at 11:58AM CST 03/11/10
I'll admidt I'm a natural bull-- every producer is optimistic-- but I must say the bears are out in force after the report-- maybe rightfully so. Yet, some of the niche contracts being offered this spring are better than last year, could it be that world producers were chasing the 3 big commodities at the expense of other crops? Will the big 3 acres be there this spring as the market suspects? Or do they need to add a little more incentive? On the same kick, if demand for fuel, food, fiber, and feed is always increasing don't we always need larger world ending stocks to maintain equivalent price? Or are these just desperate pleas from a bull?
Posted by Matt Elliott at 7:43PM CST 03/11/10
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