Corn Fundamentals

Weather and Yield Will Move Corn

Global coarse grain stocks are adequate, and U.S. corn production appears plentiful enough as well to meet demand, provided production/yield holds up under weather pressure – only time and harvest will tell.  Better-than-expected yields could send Chicago Dec corn futures under $2.00, but all bets are off if weather significantly cuts into corn yields. Should that happen, target Chicago Dec $2.55-$2.85 to make ’05 sales, considering sales with hedge-to-arrive contract, advises NDSU extension crops economist George Flaskerud.

If prices should move even higher, $2.85+, increase sales but limit contracts to insurance-guaranteed yield and consider put options on the balance. When selling, evaluate returns to storage for possible use of storage hedge using a hedge or HTA contract in July ’06 futures with delivery planned for June.  If a weather market pushes Dec futures to $2.55+, consider initiating ’06 crop sales.  Plan on using a combination of crop insurance, elevator contracts and put options, just as with the ’05 crop, and evaluate returns to storage.

Ending Stocks of Coarse Grain Relative to Total Use

Corn S/D Fundamentals Could Limit Price Potential

	2004	2005
Planted	80.9	81.6
Harvested	73.6	74.4
Yield	160.4	145
Beg Stocks	958	2,115
Production	11,807	10,785
Imports	10	10
Supply	12,775	12,910
Domestic	8,835	8,720
Exports	1,825	1,950
Use	10,660	10,670
End Stk	2,115	2,240
S/U	19.8%	21.0%
U.S. Price	2.05	1.70-2.10

Average Oct. Price Dec Futures vs. USDA’s Oct SU Estimate For Corn

Source: USDA 7/05