High prices contracting corn use?
Mar 15, 2007 9:37 AM,
By Elton Robinson
Farm Press Editorial Staff
The corn market could challenge new highs until there is more certainty about whether or not the United States has planted enough acres to satisfy demand, says a southwest Minnesota market analyst.
Acreage should start to come into focus with USDA’s March 30 prospective plantings report.
According to Alan Conrad of the Zaner Group, speaking at the Minneapolis Grain Exchange press briefing on USDA’s March 9 supply and demand estimates, “corn is going to be challenged to put in a new high until we get firmer numbers. It will also find support on the bottom side because the end user hasn’t bought up enough and he’s already feeling a little relief that corn is off 20 to 30 cents.”
Conrad believes that while corn prices will move sideways for a while, “the ranges are going to be fairly substantial.” He also believes that some rationing of demand is taking place.
“Hog weights are down 2 to 3 pounds from a year ago. If you multiply 2 pounds per animal per week, that’s 4 million pounds of pork a week. It’s also a lot of bushels not being fed.
“If I’m a producer who is buying some corn to feed his cattle, I’m not real crazy about feeding $4 corn to my cattle. So those cattle are pointed toward the gate as soon as possible.
“The pain from this will show up later in full force when the smaller producer who feeds his own corn runs out and has to start buying. With the cattle market scooting like it did yesterday (March 8) that can offset a ton of it.”
Conrad also noted a report that two planned ethanol plants in Indiana “were put on the shelf for a while. Apparently, some people are worrying that we’re getting too overdone. So there is some contraction going on in the use.”
Conrad believes that corn carryout under a billion bushels, “with this big ethanol use, is not enough corn for the security of the end user. Will we stay above $4? I doubt it. If we harvest a 12.5 billion- to 13 billion-bushel crop, $3.50 puts are going to be good as gold.”
Meanwhile, there wasn’t much of a change in U.S. old crop corn production forecast, according to USDA’s March 9 estimate of supply and demand. However, world corn production was lowered slightly.
Argentina corn production was raised 500,000 tons to 21.5 million tons, and Brazil corn production was raised 2 million tons to 48 million tons. Production is expected to be a record in both countries due to higher yields. Corn area for Brazil’s winter crop is also expected to be higher as producers respond to high corn prices with increased planting.
USDA also lowered projected cotton exports for 2006-07 by 500,000 bales to 14 million bales, reflecting continued sluggish U.S. export sales and shipments and lower estimated imports by China. Ending stocks were raised to 8.8 million bales, the largest since 1985-86.
Meanwhile a marginally higher 2006-07 world production estimate was offset by higher global consumption. World ending stocks were also reduced. China imports were reduced 1.5 million bales to 14 million bales, reflecting lower-than-expected imports for January and continued postponement of the government’s release of import quotas. Exports were also reduced for India, Brazil and the African Franc Zone. Forecast world ending stocks of 52.4 million bales are about 1 percent below last month.
U.S. soybean ending stocks for 2006-07 are projected at a record 595 million bushels, unchanged from last month, but up 33 percent from 2005-06. Global soybean production is projected at a record 229.4 million tons, up 1 million tons from last month. Brazil production was raised 1 million tons to a record 57 million tons. Growing conditions have been exceptionally good this season, especially in the southern states, which were affected by drought during each of the past three seasons.
USDA raised U.S. rice imports 500,000 hundredweight to 19 million hundredweight. Average milling yield for 2006-07 increased slightly to 70.5 percent based on millings data received from the rice industry. Ending stocks of all rice are projected at 30.9 million hundredweight, 500,000 hundredweight above last month, but 12.1 million hundredweight below a year earlier.
Global rice production was reduced 300,000 tons from a month ago due primarily to a smaller crop projected for Indonesia. Global ending stocks are projected at 79.1 million tons, up about 200,000 tons from last month, but 2.8 million tons below 2005- 06.
Global wheat production for 2006-07 is projected at 593.1 million tons, up 1.1 million tons from last month on higher production in India. Global consumption was raised 1.2 million tons. Global exports were lowered 1 million tons. Global ending stocks for 2006- 07 were raised 400,000 tons.
e-mail: erobinson@farmpress.com
