A.G. EDWARDS & SONS, INC.
One North Jefferson, St. Louis, Missouri
314-955-3050
(March 21, 2002) CORN: USDA retains an optimistic forecast for corn export sales and shipments for the balance of the 2001-02 marketing year. Despite reducing its forecast of corn export sales for 2001-02 to 1.925 billion bushels in the March Supply/Demand report, USDA's latest forecast implies record export sales and shipments over the balance of the marketing year.
Corn Export Sales And Shipments
March-August
(Million Bushels)
Chart courtesy of A.G. Edwards.
Total corn sales commitments stood at 1.141 billion bushels on February 28. In order to reach the USDA forecast, the U.S. needs to sell and ship 784 million bushels from March to August. That is an amount that exceeds the actual performance of any other year since the 1987-88 marketing year.
We will be monitoring the weekly export sales versus last year to see if the U.S. has any chance to reach the goal. Last year's sales totaled 752 million bushels during the final six months, so it is an appropriate gauge. Drought and yield concerns did spur corn sales last July as some buyers worried about available supplies. If the U.S. expands plantings in 2002 and weather is normal, that won't be an incentive for importers this summer.
Reduced export sales fall down to the bottom line for the corn supply/demand analysis. USDA forecasts carryout at 1.596 billion bushels. If exports are 100 million bushels less than the USDA forecast, and that is still an above average export pace, then corn carryout may total closer to 1.7 billion bushels. That is comparable to two years ago. Corn supplies now appear much more comfortable to the market place versus last summer when the crop was under stress.
Corn market attention will focus on USDA's forecast of 2002 corn acreage in the Planting Intentions report on March 28. At its February outlook conference, USDA forecast 2002-03 corn demand at 10.0 billion bushels. Applying a national yield of 140 bu/a means the U.S. needs to harvest 71.4 million acres. Assuming not-for-grain harvest acreage of 6.9 million, total corn acreage of 78.3 million is needed in 2002 to balance demand. A USDA forecast of 77.0 million acres or less would be a bullish fundamental development. It probably wouldn't take many more than 78.3 million acres to elicit a bearish market response to the corn acreage. Heading into the report, there is a fair amount of bearish sentiment that corn acres will top 78.5 million, and perhaps reach as many as 80 million.
We are short corn through the July wheat/corn spread. The spread was entered at 64 cents premium the wheat. Our protective close only stop is at 55 cents, premium the wheat. We are targeting 85 cents, premium the wheat.
Bill Nelson www.agedwards.com