Blogging by the Bushel
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Anna Kaverman

Mercer Landmark

It was no surprise that in the April USDA report corn ending stocks were steady from last month.  However, this move confused an already confused market. USDA analyst shifted 50 million bushels of demand from feed to ethanol. It was reported that some 2010-11 feed demand would be filled with wheat in the Southeast and early corn in the South. Traders had expected the estimate of corn ending stocks to reach about 590 million bushels because March 1st stocks had been reported about 175 million bushels lower than expected.

Now the next big question is what price will ration corn? In the next two or three weeks, the corn market may focus on rationing supplies before the focus shifts to weather. What price will ration demand is a tough question. May corn futures up to $7.40 plus in early spring didn’t ration demand, and livestock prices have even gained since then. Conventional wisdom says that it will take something more than that. One analyst noted that “We’re in a very rare time in history when price returns on produced products are keeping pace with cash production cost increases.”  What he meant by this was grain prices have climbed this past year , but ethanol producers, cattle feeders and pork producers are still making profits. You don’t have to be a financial genius to know that there is a price at which producers will cry uncle and back away, but that price has not been seen yet.

Like corn the USDA left ending stocks in the April report unchanged at 140 million bushels, but it appears that rationing may have developed in the soybean market. Export sales have eased lower in the recent weeks as the South American crop progressed. In fact, in the week ended March 31, export sales had not reached the weekly average needed to meet USDA’s projection of 1.59 billion bushels before they were trimmed in the April report to 1.58 billion bushels.

As the calendar keeps moving closer and closer to later April and then May the market should begin to shift focus from demand for existing supplies to spring planting conditions for the new crop.  Late winter and early spring weather in the Dakotas and Minnesota will offer bulls prospects of corn planting problems. If remember back to the March prospective plantings report nearly one-third of the added corn acreage would come from increases of 450,000 acres in North Dakota and 850,000 acres in South Dakota. At that time there was still snow on the ground but now the ground is wet and there is some flooding going on around the red river.  The Red River flows north between North Dakota and Minnesota. Even if the acreage does get planted, farmers run the risk of yields being reduced thus keeping stocks tight. In the mean time keep your eye on the 15 day forecast as it could provide us with a glimpse into where this already volatile market may go next.

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