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COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(October 12, 1997) CORN: The October Crop Production report released on Friday held a number of bullish surprises. The USDA is now estimating U.S. corn ending stocks at 781 million bushels. This is only the 2nd time since the 1970's, that corn ending stocks have been below 800 million bushels. The only other year when stocks were so tight was in 1995-96 when corn prices rose to an all-time high of $5.50 a bushel.
If correct, the October report suggests that at the end of the 1997-98 crop, there will only be 30 days worth of corn stocks left for use. Corn stocks are once again dangerously low. Make no mistake about that. The Production report showed an increase in corn production, but a decrease in soybean production. Since the rise in corn production was less than anticipated it was considered bullish. And the reduction in soybean production was construed as very bullish. All in all, it was a heck of a report for the bulls.
Following Friday's report, grains were sharply higher with corn at its highest level since mid-April and soybean prices at their highest level since late May. In the last seven days alone, soybeans have rallied 84 cents a bushel while corn has jumped $.38 a bushel. The grains are on fire! During harvest no less!
If, for whatever reason, there is an unexpected rise in demand for corn or additional cuts in estimated corn stocks, I will be forced to raise my upside objective for prices. For now, any target for corn remains $3.30 a bushel. But some of my work is strongly suggesting that a more realistic target is $3.75 a bushel or higher.
Jerry F. Welch
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