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The corn market managed to withstand a sharp rally in the dollar yesterday. The May contract saw modest losses early in the day, but it staged a late rally before closing higher. Corn gained substantially on soybeans in the process and traders indicate that the spread between these two markets is continually adjusting based on weather forecasts and private acreage numbers as we approach the USDA’s March 31st Planting Intentions report.
Yesterday’s action coincided with the latest Farm Futures Magazine’s survey which pegged US corn plantings at just 87.3 million acres. This is below trade expectations. South Africa has increased its corn crop forecast by 7.7% to 12.96 million tonnes versus their previous estimate. They indicate that this is due to improved yield prospects. In the US, wet weather is still expected to spread from Missouri into central and southern Illinois today before delivering the most concentrated rain amounts along the Ohio River Valley. This is a rain pattern that has repeated itself on a number of occasions over the past two years, and some traders think that this helped to support corn yesterday on ideas that early field work could be somewhat delayed in the southern Corn Belt after all. The rain system is expected to push into the eastern US by tomorrow with drier and colder weather in most of the Corn Belt on Saturday. Moderate rains are then expected in the central and southern Corn Belt on Sunday with a warmer and mostly dry spell expected to push into the Midwest from the Plains on Monday. The USDA will release its weekly Export Sales report this morning. Sales need to average 610,600 tonnes each week to meet the USDA’s export projection for 2009/10. Traders report that an Israeli firm rejected offers on a tender for 27,000 tonnes of US corn and bought 35,000 tonnes from the EU.
TODAY’S GUIDANCE: Yesterday’s hook reversal action coincided with the latest Farm Futures Magazine’s survey which pegged US corn plantings at just 87.3 million acres. This is below trade estimates somewhere near 89.0 million, and well below the highest trade estimates at 91 million acres or more. It also fits with other recent surveys suggesting that farmers are more likely to increase soybeans acres this year in comparison to their initial intentions last fall. We continue to believe plantings need to be above 90 million to avoid tightness for the coming year and could come in above 91 but concede that a smaller number is possible. Weather forecasts are still more favorable toward corn planting than was the case last week, but rain at the end of this week in the southern Corn Belt is making some traders a bit less comfortable. That is helping to support corn versus soybeans along with a raft of industry surveys that point to soybeans gaining more acres than corn this spring. This may be a lingering effect of the negative experience that farmers had with corn quality last year. May corn rejected a move under 390 yesterday and appears set to remain with some sideways action into the report next week. Given the potential to see higher soybean and corn plantings for next week, we would wait for the report before attempting to trade a spring weather market from the long side.
