ALLENDALE, INC.
4506 Prime Parkway, McHenry, Illinois
800-262-7538
(March 15, 2002) CORN: Allendale estimates U.S. corn acreage at 77.605 million and soybean acreage at 74.716 million. Wheat acreage is estimated at 59.476 million acres. New life of contract lows were made in new-crop futures going into today's close. Trade volume in new crop was about half of that in the old crop. Weekly chart support of 2082 was taken out and now viewed as resistance. We anticipate this weak area of resistance could be taken out within the first two days of next week. Daily chart support is at 2052. If taken out a move to 2000 is likely for old crop and if 2250 is taken out in the new crop then 2200 could be the next level of psychological support. Futures are technically extremely oversold and do need to correct higher. Make sure you check the CFTC/Price charts we update weekly as they are nearly in the same position as wheat was before funds covered their shorts in a major way today. We anticipate the corn trade could be ready early next week to begin to cover shorts. The Gulf rates continue to remain steady to firming possibly indicating commercials may be experiencing some difficulty in securing supplies needed to meet export demand.
Corn Export Commitments
Updated 3/14/02.
Take a look at the pace we are in. With corn futures sitting idle it is very apparent how commercials have to rally basis in order to buy the needed bushels to fill sales. Japan was a huge buyer as evidenced in the weekly export sales report and Mexico continues its strong buying pace even through what was the tense period of time when they imposed high tax rates on soda manufactured with our high fructose corn syrup.
Commitment Of Traders Futures And Options
Net Fund Positions Over Corn Prices
Last updated 3/15/02.
Allendale, Inc. © 2002.
The CFTC/Price reports point out there is far less risk to the downside than the potential for funds to cover shorts as evidence in this chart. You will also notice how funds can pick this time of year to cover shorts. The Argentine economic crisis has pushed the government to impose export tariffs with a threat of another increase in the wings. In recent years, Argentina has been more of a competitor of ours to export corn than China. Fundamentally we remain bullish due to the weakened competition. Shipments remain strong. The NOAA released their long-term forecast for drought conditions and there remains a lot of concern especially for the Atlantic Coastal states which have plenty of poultry and hogs to feed. Even the far west Corn Belt states are estimated to continue to have drought stress. We remain long futures as a result of our ten-year average study which suggest 6 out of ten years it pays to hold long old-crop futures through the month of March. We are also long a May 210 corn call which was used to help probe for a potential bottom. Those with old crop hedged corn, you continue to earn storage, but may want to consider selling cash on another 4 to 6 cent CIF rally. We estimate when futures do decide to make a run above overhead resistance of 2110, firm offers left at country elevators at the 2160 and 2200 level could take some of the basis premium out. New-crop hedgers follow our "Hedge Advice" page of this report and respect the 2330-2340 wall of resistance. If penetrated we do anticipate a move to 2410. Our long-term new-crop corn prices have a much better chance of performing on a move into and above 2420.
ACREAGE STUDY--The closer we walk into the March 28th time period there are two distinctive corn acreage camps. In one camp you have the corn acres will swell some 2 to 3 million acres due to weak cash prices for beans and looming record South American soybean crop. The other camp says a normal year on year rotation is more likely and only a small acreage increase is likely. A study we performed indicates some surprising results. In checking back to 1997, just when the new Freedom to Farm bill was taking effect, the similarities between a rally in corn and or beans from January 1 to March 1 has resulted in a very similar result in acres planted. For example the study has shown when soybean futures have rallied from January to March then acres planted rise for the soybeans. If corn futures fall from January to March, then the acres planted slips. Given the results of the study it would not be a surprise to see acres planted to soybeans increase and corn acres decrease or in corn case not rise nearly as dramatically as some assume. Be aware of this as if the prospective planted acres were to follow the similarities we could see a down day in futures for beans but supportive for corn.
Joe Victor www.allendale-inc.com