Corn Supply/Demand Bearish

Monday’s USDA supply/demand report appeared to contain more bearish news for the corn market as USDA cut old-crop usage more than expected.

USDA added 90 million bushels to 2003-2004 corn ending stocks, cutting projected exports by 100 million bushels to reflect the continued slow pace of shipments and competition from Argentina.

Old-crop food, seed and industrial use was raised 10 million bushels, but USDA’s new ending stocks figure of 896 million bushels was 23 million above the average of trade expectations.

USDA added 250 million bushels to projected 2004-2005 corn ending stocks, pegging them at 991 million bushels, mainly reflecting larger expected U.S. corn production.

USDA pegged the 2004 U.S. corn crop at 10.635 billion bushels, using the planted and harvested acreage figures from the June 1 acreage survey and keeping the projected U.S. yield at 145 bushels per acre.

USDA did raise projected 2004-2005 usage by 50 million bushels, with the increase coming in the feed and residual use category. USDA did not raise ethanol usage as some expected and left its 2004-2005 export estimate unchanged, despite the slower-than-expected old crop demand.

The world supply/demand balance sheet for corn showed world ending stocks for 2004-2005 rising by 7 million metric tons (276 million bushels) to 75.86 million tons (2.989 billion bushels), mostly due to the higher U.S. production estimate. Despite the increase, world corn stocks are still projected to be historically tight.

While the supply/demand data is fundamentally bearish for corn prices, the corn futures market is clearly oversold and may have already factored in most of the bearish news.

As a result, we could see a short-term price rebound at any time. However, the long-term trend should remain down into harvest, barring a major shift in Corn Belt weather. Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.