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December 1, 2005 Market Advisor: Corn Exports Needed for Prices to Improve
The pace of corn exports lagged year-ago levels as of Nov. 17. The pace also lagged levels of the two previous years, but was a little ahead of the 2001-through-2002 pace. The pace of exports has implications for marketing. I would target July corn futures in the area of $2.37 for completing old-crop sales, which is a price increase of 19 cents from where the market was trading on Nov. 28. Once the price objective is achieved, consider using a hedge-to-arrive (HTA) elevator contract specifying July futures and June delivery. Hopefully, the basis will improve enough to make storage profitable. On average, June was the peak basis at Hunter, N.D., from 1999 through 2003, excluding the low and high. June looks like the best month for delivery when current futures prices are combined with the expected basis and storage costs. The use of a HTA contract is encouraged once the price objective is achieved because the fundamental and technical outlook for corn suggests that July futures may have difficulty surpassing $2.37 without adverse growing conditions next summer. The corn crop was second in size to last year's record, but ending stocks are projected to exceed last year's level. A chart of July futures shows a gap at $2.37, which makes that price a technical price objective. Historically, a price objective of $2.37 is reasonable. July futures after Dec. 1 have exceeded $2.37 during four of the last five years. One year the price peaked just a little lower, at $2.35. During three of the last five years, July futures have increased about 17 to 21 cents after Dec. 1. During one year, July futures increased by only about 10 cents after Dec. 1, but during another year July futures increased by about $1. The USDA is projecting that corn exports will exceed last year’s level by about 10 percent, which seems appropriate, given the plentiful supplies. An important factor will be China. The USDA is projecting that China will export 3 million metric tons this year, compared with 7.59 million metric tons last year. The net effect is that a modest improvement in July futures is reasonable to expect, but an improved pace of exports is necessary. The pace of exports is total commitments to date as a percent of total exports projected for the marketing year. Total commitments are actual exports plus unshipped sales. The USDA in the Nov. 10 supply and demand report projected total exports. Export performance can be found at www.fas.usda.gov/export-sales/weekpi.htm. ### Source:
George Flaskerud, (701) 231-7377, gflasker@ndsuext.nodak.edu |
Market Advisor: |
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North Dakota State University |
