CORN:

The corn market has remained in a rally mode since the last Growing Trends, but the magnitude of the rally has slowed and become a bit more choppy since the big move of last month. The funds have been the featured player of 57.2 million for week ending March 4. While the week ending March 11 showed funds liquidating 42 million to leave them net long 262 million. The current rally has been ballooned by the soy complex and technical considerations. The producer has rewarded the price rise with good cash selling which has put the basis under pressure, leaving the western Corn Belt basis at record lows. The USDA released their Supply and Demand report on February 12 for corn and feed grains on a world and U.S. basis. The U.S. numbers were completely unchanged, compared with the last two monthly reports, while the world production was reported lower 1 mmt due to a smaller estimate of the South African crop.

USDA Supply/Demand For U.S. Corn
(Released March 12th)
1996/1997

The table shows the latest USDA stats and how I view the current year and the possibility of the 1997/98 crop year.

FEED/RESIDUAL

The USDA is very optimistic with their projection of this sector as their livestock reports don't dictate this type of usage. It is true that the January stocks report came in nearly 100 million bushels below estimates (see January Growing Trends for comments) which should have only increased feed to 5.075 million (adjustment from the December report). The total cattle inventory is 2% below last year. While the pork sector has seen very little expansion since the December Hog and Pig report which showed 4% less total hogs and a record low breeding heard at 3% below last year. The most recent Cattle on Feed report was encouraging, but we must focus on total numbers and the harsh winter to the north doesn't project bigger number past this recent report of large placements. The current meal and corn price rally leaves livestock feeding margins suspect to profitability. The 1997/98 crop year mayÔ) while new©crop sales (adding to existing sales) should be protected at current levels. The trader should look at cheap puts to position short until the markets actually turn lower on the charts. The longer©term outlook (1999 forward) is very positive for prices as increased foreign demand (Asia, Mexico and undeveloped countries) due to better diets will increase demand for feed grains. I feel we are taking the low end of the market to $2.50 basis new crop and only an increase in yield or a collapse of world economies will put prices below these values.

Doug Price

Article Index

You may also contact CONSENSUS at:

Relocated 04-06-97
Last updated on 04-06-97

Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com

wmeubank@ocp.kcmo.com