wmeubank@ocp.kcmo.com
ALLENDALE, INC.
4506 Prime Parkway, McHenry, Illinois
(October 10, 1997) CORN: CORN GETS BETTER–Bigger yields in IL offset the lower yields in IN, NE, WI. USDA pegged the crop 9312 mil. bu. versus 9268 last month and within 0.78% of our estimate. This is the 3rd largest crop with '92 and '94 larger. Typically, expect USDA to raise the crop between 9345 and 9477 by the final report. As harvest progresses, we will fine tune this estimate. USDA raised the domestic feed use to reflect the larger livestock herds, and left the exports unchanged as it is too early in the season to lower exports more in line with current sales and shipments. With the higher demand, stocks fell to 781 mil. bu., the 3rd lowest since 1975, and compared with 426 mil. bu. in 1995. Stocks to use fell to 8%, a 29-day supply which is the tightest since 1995's 18- day supply and 1974's Russian robbery. World supplies also fell as they reduced the China crop to the 105 mmt as expected. USDA did not raise their imports, but did increase their exports from 1.5 mmt to 2.5. Because of the 5 mmt reduction in China's crop, world stocks fell to 63.7 mmt versus 70.85 mmt last year and is actually 2.5 mmt less than in 1995 when prices hit 5.00! However, in 1995, stocks of all grains were much tighter than this year. Wheat stocks this year are 22 mmt or 21% more than in '95. So as long as El Nino doesn't wipe us out, there is not the total shortage of grains that existed in 1995 and it probably is not a fair price comparison. USDA pegged the price range between 255 and 295. We looked for other years when prices rallied in the 4th quarter. We only found 1995 and 1993. 1995 was demand driven with a reduced crop. This year has strong domestic demand but lacking export demand and we have the 3rd largest crop. The big swing factor will be whether China begins buying corn to replace their exports. 1993 rallied in the fall due to the flood and then a freeze. Thus there is no real good comparison for us to provide you direction. If we use USDA's economic range, the market has hit the upper end of the price range. Technically we felt that 2914 would stop the rally. With futures extremely overbought, we sold into the strength (again). Today's close was bearish on the chart. With rain moving in and minimum storage fees soon due, we expect increased farmer selling as 2.80 corn and 150 bu. equates to a nice trip to Florida this winter.
Bill Biedermann
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