The story of the day continues to be centered on corn.
CORN futures on the Chicago Board of Trade (CBOT) finished at its highest level in three years on Monday amid outlook for tight supplies. The MAY’11 contract closed at $7.602 up 24.25¢/bu. The DEC’11 contract closed at $6.454; up 8.0¢/bu. On Monday commodity funds were net buyers of an estimated 25,000 contracts. Floor sources estimated that funds have bought over 95,000 corn contracts in the last three sessions, representing 475 million bushels of corn worth $3.5 billion based on current spot market prices! Although it is not known exactly how many corn contracts funds have bought, at what prices, that many bushels of corn would be worth about $3.61 billion based on the May 2011 contract price. Cash corn bids and basis rose on the bullish theme continuing to filter through the market following last week’s supply outlook from USDA. USDA projected corn inventories are expected to remain at the lowest levels in 15 years even as farmers claim they will increase planted acres by 5%. USDA pegged U.S. corn plantings this spring at 92.2 mi acres, above the average estimates and the second highest since 1944. Feed, ethanol, residual, and export demand are holding firm. At this rate the U.S. corn supply is on track to have end-of-season inventories lower than four day’s supply and raises prospects that any disruptions in corn supply during 2011 will make feed grain supplies critically tight over the next year. According to Darrel Good, an agricultural economist at the University of Illinois, “It appears that consumption is progressing at a rate that is unsustainable by available supply.” Farmers have been aggressively selling corn supplies and booking forward into 2011 and 2012 for $7/bu spot cash. That same sales pace is limiting advances in basis. Windy, wet weather is forecast to continue in the U.S. corn belt and may slow planting if it keeps up according to forecasts from agricultural meteorologists with USDA. Corn is now at near parity with wheat indicating wheat demand could surge for feed if corn supplies really tighten.
SOYBEAN futures on the Chicago Board of Trade (CBOT) finished mixed on Monday with all of the 2011 contracts declining amid profit taking. The MAY’11 contract closed at $13.840/bu; down 9.75¢/bu. NOV’11 soybean futures closed off 0.25¢/bu at $13.890/bu. Funds trimmed net bull positions in CBOT soybeans shifting to wheat positions. Funds sold 8,000 soybean lots and bought 8,000 wheat contracts. Reports that South America will likely harvest a record crop and talk of China shifting orders from the U.S. to Brazil pressured prices. Soaring corn prices supported soybeans late in the day. Soybean export and river basis are under pressure from lower basis levels at ports in Brazil and talk of China rolling back cargoes of previous purchases in export markets amid poor domestic crush margins. The uncertainty of U.S. weather heading toward spring plantings and its impact on final acreage totals will keep a very cautious outlook on selling, particularly in view of volatile price action.