This article is brought to you by:
CONSENSUS

ALLENDALE INC.
4506 Prime Parkway, McHenry, Illinois
800-262-7538

(March 22, 2002) CORN: For the week corn closed down .012. Thus far this month corn is down .042 versus its February close. One thing is for certain, each day the CBOT floor trade deems it necessary to rally the beans and not bring corn along for the ride, talk out of the south and southeast U.S. is there is a growing possibility less cotton acres could be planted this year and more soybeans will. Wide new crop corn basis, narrower than average new-crop soybean basis and lack of storage for corn plus aflatoxin are issues farmers face and those who are responsible for marketing plans favor the beans over corn. China is said to be prepared to release TRQ's before the end of next week. The trade will have possibly have its single largest day for the month of March next Thursday as the trade will absorb the USDA's Quarterly Grain stocks and Prospective Planted Acreage reports, but then need to be protected against the Quarterly Hogs and Pigs report issued at 2 pm. The trade will also need to protect itself from the closed doors at the CBOT, the next day, Good Friday. If China has not issued their TRQ's before the end of Thursday, look for the CBOT to keep a lid on any major buying of corn futures, to limit the possibilities of walking into a bee hive on Monday morning, in case China does release the TRQ's during the weekend. China could take advantage of our futures play and we need to be mindful of their tactics. Fundamentally we are friendly to the old crop and new crop for reasons stated in the recent past. Slow farmer selling, good export shipments, continued growth in industrial use as well as research tools such as the CFTC/Price study charts which indicate seasonals could be ready to kick in any day. However, technicals such as the daily old-crop and new-crop corn charts have the corn market very much bearish. Corn is more oversold than overbought and we would not recommend shorting new- or old-crop futures at present levels. The good news for old crop is as long as the trade does keep corn futures under its thumb, basis and flat cash are staging rallies of their own and we have actually caught some of the large commercial elevators use the word premium for nearby arrivals. Use the rally in basis and cash to remove old crop from the bin and use long calls, bull call spreads and long futures to replace inventory as we view the downside risk low compared to the upside potential. Technical resistance comes in on the December at 2330 to 2340 where we are willing to hedge a small portion of new-crop production and will be ready to hedge larger amounts on a move into the 2400 to 2410 area. Russian officials have said the ban on U.S. poultry may be solved in thirty days. This timeframe will coincide nicely with a visit from President Bush and will allow Russia to work its way through their temporary surplus of poultry. Each day the ban remains in place the old crop and then the new crop grow heavy and may be limited in any significant seasonal bounce.

CORN ACRES--We went back to the January 1995 Final Acreage report and compared each January report to the next March "Prospective Plantings" report and came up with the following to prepare for next Thursday. From the January report to the following March report the average result is the March Prospective Plantings report increases 1.15 million acres. The 1.15 million acre average on top of this past January's acreage estimate for last year's corn acreage of 75.8 million acres could translate to a March 28 PP estimate of 76.95 million acres. When looking at the change in acres from the final January estimate to the March prospective plantings estimate, it has not be uncommon for a swing of 2 to 3 million acres plus or minus. The smallest increase during the time frame studied was 500,000 acres in March of 2000 over the January estimate for the 1999 planted acres. The largest decrease was 2.8 million acres estimated a year ago versus the January estimate of 79.5 million acres for the 2000 crop. The smallest decrease was 2 million acres estimate at the March 1999 report versus what was planted for the 1998 corn crop. The huge swing year was when we planted 71.2 million acres in 1995 and then the following March the "Prospective Plantings" report came up with a huge 8.7 million acre increase. Let us not forget the present world ending stocks of corn are 128.22 million tonnes versus about 125 MT in 1995 and from the December, 1995, to the end of March-December, 1996, corn futures rose from January's rough average of 2850 to 3200. Should the CBOT floor trade be floored by an increase of 2 to 3 million acres of corn estimate on March 28th versus the January report? Not if they have read this study.

 

Joe Victor

www.allendale-inc.com

Hosted by:
CONSENSUS, INC. AND INVESTORS CO-OP
P.O. Box 520526
Independence, MO 64052-0526
816-373-3700
Fax: 816-373-3701
editor@consensus-inc.com