Pre-Opening Corn Market Report for 6/10/2011

July corn was down 4 cents late in the overnight session. Outside market forces are negative today with weaker energy prices and a firm US dollar. On top of the negative tilt to outside markets, the US Midwest weather forecast for the next few weeks looks very "normal" and this sets the stage for a good start to the corn crop which has already been planted. However, the USDA supply/demand outlook leaves no room for any supply or demand surprises ahead and physical buyers are likely to be active on set-backs. With the USDA corn production estimate at 55 million bushels below expected usage, and ending stocks already at the second tightest in history compared with usage, any further declines in production would suggest that demand will need to be rationed. This was the key positive force for the corn market yesterday as July corn pushed to a contract high and all-time high after the report. The USDA report confirmed a tight outlook for another year for corn and the market is now in a position to "need" near ideal weather conditions to avoid extreme tightness and rationing ahead. The outlook assumes that we will only lose 1.5 million acres from late plantings but as of June 5th, there were still 5.53 million acres left to plant and there is rain in the forecast for the northern half of the Corn Belt for the next few days. In addition to getting the last of the crop planted on time, the market may also have to contend with a general perception that near 450,000 acres already planted to corn in South Dakota, Nebraska, Iowa and Missouri could be lost due to flooding of the Missouri river. The USDA assumed some losses for Mississippi and Missouri river flooding in their harvested acreage estimate but a number was not given. US ending stocks for the old crop season were pegged at 730 million bushels, unchanged from last month and about 25 million above trade expectations. The June stocks report and planted acreage reports at the end of the month will give the USDA a better idea on corn demand and the 2010/11 ending stocks or the 2011/12 beginning stocks number could be revised even lower in the July supply/demand report. For the 2011/12 season, ending stocks are pegged at just 695 million bushels as compared with 900 million bushels last month and trade expectations near 770 million. This is a 5.2% stocks/usage ratio which would be the second tightest on record. Yield was left unchanged at 158.7 bu/acre but planted area was revised down by 1.5 million to 90.7 million acres and harvested acres down by 1.9 million to 83.2 million. As a result, production is down 305 million bushels from last month. Feed usage for the new crop season was revised down by 100 million bushels. Corn yield normally moves down when planted after May 20th and the relationship is not linier as yield drops more sharply for corn planted into June. This year, 19.4 million acres were still not planted as of May 22nd. World ending stocks for the 2011/12 season came in at just 111.89 million tonnes, as compared with 129.14 million tonnes last month and 117.44 million this year. This is a 12.8% world stocks/usage ratio which is the tightest since 1973 and the third tightest on record. The world situation is tight and the USDA assumes a jump to 178 million tonnes for production in China which is a record high, up 4 million from last month. China production was 173 million tonnes last year and 158 million two years ago. China demand was increased by a whopping 13 million tonnes from last months estimate to 181 million tonnes. Export sales for the week came in at 320,399 metric tonnes for the current marketing year and just 29,900 for the next marketing year for a total of 350,299. Sales of 343,000 metric tonnes are needed each week to reach the USDA forecast. We should note that old crop sales included 56,900 tonnes to China switched from unknown destination. The process of developing E15 labels for pumps is still ongoing with a target of September and this might be a factor to boost ethanol usage next year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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