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Look for old crop corn, soybean and wheat futures to be sharply up today following a monthly USDA supply and demand report that cuts ending stocks of corn in the U.S. to 675 million bushels, down from January’s estimate of 745 million bushels left in the pipeline by the end of next August.
“It’s a bullish scenario,” says Don Roose, an analyst with U.S. Commodities, Inc. in West Des Moines, Iowa. “What we did on this report is increase food use 20 million (bushels) and ethanol use 50 million.”
His firm is calling corn futures to be up 15 cents to the 30-cent limit today, with soybeans and wheat both up 10 to 15 cents.
Prices will have to rise to ration demand, Roose believes, with the ethanol industry being more vunerable than an already shrunken and lean livestock sector of agriculture.
“We’re probably below minimum so I think we’ll have to go up to make this work,” he says. “I’ve been telling people we’ll quickly go up to $7 on corn.”
“It’s all about the need to ration corn and the acreage battle,” he says.
In the global picture, “We’ve got the world’s biggest cushion on wheat, compared to corn and beans this year,” he says. but with China looking droughty, you could have lower stocks.
“That’s what’s pushed wheat up here lately, along with dryness in the U.S,” he says. “We’re going to be coming out of dormancy both in the U.S. and China soon.”
South American soybean supplies didn’t change much in the report. USDA took the Argentine bean crop down a million metric tons (mmt) but it took the Brazil crop up a million.
“With this usage you’ve got to ration the supply somehow,” Roose says. “You’ve got to slow down demand. There will be a give at some point in time. From our vantage point, the one that has to give is the ethanol.”
Here’s the complete World Agricultural Supply and Demand Estimate (WASDE).