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(March 21, 2002) CORN: Grain producers have been waiting for a rally to sell corn, but prices keep sliding from bearish fundamentals. Export demand is sluggish although inspections were better than expected last week at 45.0 million bushels. However, our weekly shipments have not been consistent and need to average 40.9 million bushels to reach USDA's target of 1.925 billion bushels. As it stands now, we are shipping only 33.6 million bushels per week which implies there is ample room for them to eventually cut 200 million bushels from their forecast. Traders are looking ahead at the March 28th Planting Intentions report and most are anticipating a 3.0 million acre increase. This may be on the high side as the farm bill will not likely get resolved in time for planting as Congress will not reconvene from their Easter recess until April 9th. Traders have been optimistic the past few months about increased ethanol production boosting domestic corn consumption. However, they received a setback this week as California has delayed the ban on the gasoline additive MTBE until January 2004. This reduces the likelihood of an increase in ethanol production during 2003.

Technically, July futures are stuck in a quagmire. The market slipped to a new contract low this week from where there was a feeble rally. The technical indicators are neutral and means it will be difficult for a recovery to develop unless there is a change in the fundamentals. The first chance of this happening is March 28th when the Planting Intentions and Grain Stocks reports are released. Normally, March is usually a strong month for corn futures. However, when prices fail to advance, the decline in April can often be brutal. Historical data shows that when this situation develops, a bottom does not usually occur until late April to mid-May or possibly late June. Under the present circumstances, July futures must rally above 219.5-222.5 to turn the trend around. Unless this develops, a decline to 206-203 is likely with 194 the extreme. December corn could fall to 215-210. Watch the period around April 4th for signs of an early bottom. Bear in mind that longer term there is a 75 percent probability new crop prices are higher now than they will be this fall.

 

Dewey Strickler

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