November was a bearish month as prices lost 52 cents. The November USDA supply/demand report estimated the corn crop at 12.54 billion bushels, this was down from the October estimate of 12.664 bb.
Carryover stocks at the start of next year’s harvest were estimated at only 827 mb. By comparison, last year at this time, the USDA forecasted corn ending stocks at 1.625 billion bushels. Usage remains at a near record large pace of 13.43 bb, 450 million bushels more than a year ago. It is interesting to note that demand is forecast to outpace production, despite the U.S. producing its third largest crop in history.
While total usage is outstanding, export demand is painfully slow. Cumulative exports have totaled 900 mb, better than last year’s 810 mb, but slow enough the USDA may be forced to reduce its export profile in future reports. The USDA supply/demand report on Dec. 10 looks to lend little direction to prices, with no production adjustment and the USDA is likely to lower demand forecasts by 15 to 25 mb.
Fund buying is the most bullish driving force for prices with very little farmer hedge pressure until after the first of the year. One potential bearish development is a bullish monthly reversal was scored in the U.S. dollar index. If the U.S. dollar rallies, following through on the monthly reversal, look for commodity values to suffer.
November was a slightly higher month as prices only rallied seven cents in November. The November supply/demand report estimated the soybean crop at 3.375 billion bushels, 33 million bushels smaller than last month’s crop and one of the largest production figures in history. Carryover stocks at the start of next year’s harvest are estimated at only 185 mb, down 80 mb from last month and 34 mb more than a year ago.
Demand is also at a record large pace, led by record exports of soybeans, mostly to China. Total demand is forecast at 3.351 bb with exports at 1.57 bb compared to 1.325 bb a year ago. Production looks to just barely outpace demand this year, but that could change quickly if U.S. producers cut back on soybean production in 2011.
Brazil and Argentina currently are planting their crops under dry hot and weather conditions and at a record pace. Note, Brazil and Argentina store little to no excess grain, as storage elevators are absent from the countryside. Grain goes from field to port, which means they need to forward contract, or pre-sell their crop before it’s harvested to insure it doesn’t pile up on the farm.
This means South America will post its price for beans under any U.S. price to insure they capture the export business, as there is nowhere to store it. From the start of the U.S. harvest in October until South American soybean harvest in March, the big demand window for U.S. soybeans as South American supplies are unavailable and the U.S. is the only port of origin for the world’s needs.
China remains the world’s largest importer of soybeans as its growing economy demands high protein and oil contents. The USDA supply/demand report on Dec. 11 looks to lend little direction to prices, with no production adjustment and the USDA is likely to raise export forecasts by 5 to 10 mb as weekly export sales remain strong.
Corn closed the week $.35 1/4 higher. Last week, private exporters reported sales of 238,000 metric tons of U.S. corn to an unknown destination and 135,128 MT of U.S. corn to Japan. The weekly export sales report showed net sales of 758,100 MT were down 8 percent from the previous week, but up 27 percent from the prior four-week average.
The 50 percent retracement on the weekly continuation charts occurs at $5.26, a likely destination for December corn.
Strategy and outlook: Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options. Don’t become too aggressive marketing the 2011 crop until more is known about the 2011 marketing year.
Soybeans closed the week $.61 3/4 higher from last week. Last week, private exporters reported sales of 165,000 MT of soybeans to an unknown destination, which will likely be China.
The weekly export sales report showed net sales of 1,341,600 MT were up 99 percent from the previous week and 32 percent from the priorfour4-week average.
Strategy and outlook: Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options. Don’t become too aggressive with marketing the 2011 crop until more is known about the 2011 marketing year.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.
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