Morning Futures Roundup

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Just How Much Corn Will U.S. Producers Plant?


 Fundamentals

2011 was supposed to be a near record year for Corn acreage in the US, with the USDA estimating a whopping 92.2 million acres being planted, which if true, would be the second highest total since 1944. Higher planted acreage was also behind the USDA's estimate of a record 13.5 billion bushel harvest this coming season if growing conditions cooperated.

However, Mother Nature has not been so kind this spring, as abnormally high precipitation has left Corn planting progress well behind recent averages. This is especially true in North Dakota, Minnesota, Indiana, and Ohio, where producers are way behind in Corn plantings and we are now past the May 15th deadline when, historically, Corn planted after this date may suffer from below average yields.

It is still unclear how much potential Corn acreage will end up being planted with other crops, such as Soybeans, or will not get planted at all, but it does appear that the USDA's estimate will end up being unrealistic, with some analysts now calling for at least a 2 million acre decline from what the USDA estimated.

This potential cut in acreage could not come at a worse time, as US Corn inventories are expected to be at 15-year lows and every acre will be needed to keep up with rising demand. Not even near record high prices are curtailing US Corn exports, with the USDA reporting weekly Corn exports totaled 1.2 million tons, with nearly 850,000 tons slated for old-crop Corn.

Though it is still very early in the growing season to accurately predict Corn production levels, the current supply and demand situation would almost mandate that the US produce a record crop this year, or prices may need to move even higher to help ration supplies.



 Technical Notes

Looking at the daily chart for September Corn, we notice the recent up move has begun to stumble as prices neared the 725.00 area. Three prior attempts to rally above this price level were met with renewed selling interest that ultimately culminated in a nearly 75-cent decline. However, prices have rebounded quickly to the upside, and now remain well above both the 20 and 200-day moving averages. Corn bears will also note a bearish divergence in the 14-day RSI. Corn bulls will need to see an up-side breakout soon, or we may start to see weak longs begin to exit positions, which could put pressure on the market. Resistance for September Corn remains at the contract high of 728.75, with support seen at the May 12th low of 638.00.

 
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