COMMODITY INFORMATION SYSTEMS
TECHNICAL COMMENTS
Neutral Old-Crop Outlook--Bullish New-Crop!
(January 6, 2001) CORN: A major bottom was completed in October. Following bottom completion, the first leg of the advance (1) gained 15 cents. (Note: the chart has been reconfigured since the last issue.) The second leg (2) also gained 15 cents. If the pullback is extended, as occurred following the first leg, the buy zone will range from 2.51 to 2.55. Stochastics gave a sell signal on the close of January 2, 2001, indicating that a pullback was imminent. Following the pullback, objectives for the third leg will range from 2.66 to 2.70.
December Corn
©2001 CQG, Inc.
The USDA will release their final crop estimate on January 11. The study
compares years when yield estimates during October and November...
| January Yield Estimate To Decline! Years Of Reduced Corn Yields In October And November |
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| Year | Oct | Nov | Jan | % Chg from Oct |
| 1968 | 82.1 | 79.4 | 78.5 | -4.4 |
| 1970 | 72.2 | 70.8 | 71.7 | -0.7 |
| 1973 | 93.7 | 92.4 | 91.4 | -2.5 |
| 1974 | 74.0 | 72.5 | 71.3 | -3.6 |
| 1983 | 82.9 | 80.5 | 81.1 | -2.2 |
| 1990 | 120.3 | 119.0 | 118.5 | -1.5 |
| 1993* | 110.3 | 103.1 | 100.7 | -8.7 |
| 1995 | 116.6 | 113.7 | 113.5 | -2.7 |
| 2000 | 139.6 | 137.7 | ? | ? |
| *--Flood Year. | ||||
Since 1965, there have been eight years when the USDA reduced the yield estimate in October and November. In each year, the January yield estimate was below October and November. Eliminating 1993, as it was a flood year, the average decline for the remaining seven years was 2.5%. An average decline from October's estimate this year would be 136.1 bushels per acre. Based on the USDA's November acreage estimate, a 136.1 yield points to a January crop estimate of 9935 million bushels.
The USDA will also release the December 1 Stocks report on January 11.
Our estimate of the report is as follows...
| December 1 Stocks Estimate U.S. Corn--Million Bushels |
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| 1998-99 | 1999-00 | 2000-01 | ||
| Actual | Actual | PP Est | % Chg | |
| Sep 1 stocks | 1308 | 1787 | 1715 | -04 |
| Production | 9759 | 9437 | 9935 | +05 |
| Imports | 4 | 4 | 4 | +00 |
| Total Supply | 11071 | 11228 | 11654 | +04 |
| Food/industry | 450 | 459 | 478 | +04 |
| Feed/residual | 2118 | 2210 | 2250 | +02 |
| Exports | 450 | 534 | 495 | -07 |
| Total demand | 3019 | 3203 | 3223 | +01 |
| Dec 1 stocks | 8052 | 8025 | 8431 | +05 |
The season began with supplies up 4% from last year and up 5% from 1998-1999 (based on our production estimate of 9335 million bushels). Industrial demand is expected to increase 4% over last year due to record ethanol production. Feed/residual is expected to be up only 2% from last year as usage during 1999 was overstated to correct an understatement from the previous quarter. Exports are forecast to decline 7% from last year due to the StarLink problem. December 1 stocks are forecast to exceed last year by 5%.
The ratio of December 1 stocks to September/November usage is a relative measure of tightness for the remainder of the crop year.
Adequate Relative Supply
December 1 Stocks As Percent Of September-November Usage
Before "Freedom to Farm" legislation in 1996, the marketplace viewed a ratio of 280 as reasonable. However, following 1996, the marketplace viewed a ration of 250 to 260 as excessive and March futures near $2.30 during the winter quarter.
The old-crop supply/demand balance appears more than adequate, based
on our forecast of December 1 stocks. However, a potential fertilizer shortage
this spring, in addition to record irrigation costs, will reduce corn acreage
for the 2001-2002 crop. With prospects of reduced acreage and demand at
a record pace, the market may view prospects of larger ending stocks as
needed to avoid a supply shortfall....
| U.S. Corn Supply/Demand Million Acres And Barrels |
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| 1989-99 | 1999-00 | 2000-01 | 2001-02 | |
| Actual | Actual | PP Est | PP Est | |
| Planted acres | 80.2 | 77.4 | 79.6 | 77.61/ |
| % harvested | 90.5 | 91.1 | 91.7 | 91.5 |
| Harvested acres | 72.6 | 70.5 | 73.0 | 71.0 |
| Yield | 134.4 | 133.8 | 136.1 | 134.02/ |
| Beginning stocks | 1308 | 1787 | 1715 | 1760 |
| Production | 9759 | 9437 | 9935 | 9515 |
| Imports | 18 | 15 | 10 | 10 |
| Total supply | 11085 | 11239 | 11660 | 11285 |
| Feed | 5471 | 5673 | 5800 | 5850 |
| Food/industry | 1846 | 1913 | 1975 | 2045 |
| Exports | 1981 | 1937 | 2125 | 2250 |
| Total demand | 9298 | 9524 | 9900 | 10145 |
| Ending stocks | 1787 | 1715 | 1760 | 1140 |
| 1/--Assumes a two million acre reduction from last year. | ||||
| 2/--Lower yields are expected as farmers utilize less fertilizer per acre. | ||||
The combination of lower production and lower demand than forecast is expected to result in ending stocks nearly identical to the USDA's December 12 forecast. However, it is important to note that demand of 9900 million bushels would be record high and 4% above the previous record. Prospects of lower acreage and yields for the 2001-2002 crop, combined with record demand trends, points to 2002 ending stocks at the lowest level in five years. Any hint of crop problems during the coming season would require sharply higher prices to curb demand.
Because last year's feed/residual sue appeared to be overstated for
the September/November quarter, we do not expect a sharp increase in usage
for the September/November quarter this year. With December 1 stocks projected
406 million bushels above last year and first quarter demand nearly unchanged,
the marketplace could view the USDA stocks report as negative. Therefore,
we suggest holding only moderate positions into the January 11 reports.
We plan to increase long positions during the seasonal "February Break."