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Latest USDA report a ‘jaw dropper’ for corn

by 5m Editor
18 January 2007, at 10:05am

MONTANA - The January supply/demand report for corn was a jaw dropper for the industry. The USDA sharply reduced the 2006 production figure to 10.535 billion bushels, still the third largest in history, but this figure is nearly 1 billion bushels less than the USDA estimate in August.

The USDA’s final estimate of the 2006 production not only shocked the market, but also scared end users into aggressively scrambling for coverage via the cash markets, futures and options markets.

With the smaller production figure, the USDA also lowered projected ending stocks for this marketing year to the second smallest in history at 752 mb. World ending stocks are also projected to decline to 86.44 mmts, the tightest stocks figure on record. U.S. quarterly stocks are estimated at 8.93 billion bushels compared to 9.815 billion one year ago.

With end users scrambling for supplies, the market’s job will be to ration the crop which can only be accomplished by forcing prices higher. This will also force new crop corn prices to move sharply higher in an effort to entice producers to plant more corn acres in 2007 than in 2006 to meet the record demand base of corn. With demand forecast at 11.760 bb, U.S. producers will need to plant at least 10 million more acres in 2007 to begin to rebuild the carryover stocks and ensure the U.S. will not run out of corn.

Source: The Prairie Star

5m Editor