Corn was the feature of this morning’s monthly USDA supply and demand report.
Both domestic and world projected ending stocks dropped significantly – in the US, due to increased demand from ethanol/food use, and in the world due to a 15% downward revision in Argentina corn production.
The chart below highlights the downward march in USDA carryout forecasts since spring of 2010.
Photo: Linn Group
Opening calls for Wednesday’s open are 20-25 cents higher. Although extremely bullish from a fundamental perspective, the market reaction should be fairly controlled.
Before today’s release, ending stocks were already at a level considered “bare minimum.” The February number reinforces the idea that price needs to ration consumption of corn, so as to bring carryout estimates back up to acceptable levels.
Corn prices near $7 may accomplish this, for a moment. Corn settled Tuesday at $6.74 in the March contract, rallying 5% in the month of January, and has nearly doubled year over year.