Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Ahead of the Report
Two days ahead of what many are expecting to be a bearish USDA supply/demand report due to U.S. and World ending stock estimates, an extremely positive development entered the fray. Rumors of Chinese interest in U.S. corn and DDGs resulted in sharply higher trade yesterday as buying from both sides of the market emerged. Spillover support from the corn market led soybean contracts to solid gains on Wednesday. The nearby May contract closed above both the 20-day and 50-day moving averages, which could trigger additional noncommercial buying this week. Noncommercial short-covering led to a second consecutive session of double-digit gains for wheat. This sets up the possibility of a bullish reversal on the continuous weekly chart Friday. Tomorrow morning (Friday, April 9) USDA will release the April Supply/Demand report. Although no major surprises are expected, it is possible that USDA will increase U.S. and World ending stocks of corn; increase U.S. and World ending stocks of soybeans; with world ending stocks for all wheat being closely watched to see if stock estimates actually increase or decrease due to production decreases in some key growing areas.
The rumor gave life to an otherwise dismal looking outlook for the commodities market. Yesterday’s rally occurred in spite of a stronger dollar, weaker energy prices, and a weaker Dow. The rumor may also have been buoyed by a wet forecast for the Western Corn Belt for next week likely to cause delays in field work.
Big Crops Get Bigger
An old adage in grain marketing says that ‘big crops get bigger’. Many are expecting the Southern Hemisphere soybean crop to get bigger in tomorrow’s release of USDA’s production forecast. Pre-report production forecasts for Brazil are estimating 2010 soybean production at 67.1 to 67.4 million metric tons. Argentine soybean production estimates are projected at 55 MMT. In March USDA projected Brazilian soybean production at 67 MMT and Argentine production at 53 MMT. Brazilian corn production was forecast at 51 MMT and Argentine corn production was forecast at 21 MMT in the March projections. Although the Brazilian corn production estimate is unchanged from last year, the Argentine corn production estimate is running on the order of 6 to 7 MMT larger than last year. This in turn will make more corn available to the world market.
Market Strategy
Rumors of Chinese demand for U.S. corn will need to be confirmed. However, if confirmed the positive impact upon corn prices would be most welcome providing some impetus to kick starting the seasonal rally for corn and soybeans. Obviously the U.S. is not the only supplier of corn to the world market. In a typical year Argentina is the 2nd largest corn exporter with approximately 6 to 8 MMT available for export. The U.S. exported 61.91 MMT in ‘07/08; 47.18 MMT in ‘08/‘09; and the March estimate projected exports at 48.26 MMT in the ‘09/‘10 marketing year. Argentina exported 14.8 MMT in ‘07/‘08; 10.10 MMT in ‘08/‘09; and the March estimate projected Argentine exports at 12.0 MMT for the ‘09/‘10 marketing year.
On Thursday, Dec ‘10 corn futures closed at $3.88; Nov ‘10 soybean futures at $9.41; and July ‘10 SRW wheat futures at $4.88 per bushel. Since last week, Dec corn futures improved 11 cents; Nov soybean futures improved 27 cents; and July SRW wheat futures improved 12 cents per bushel.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.