June 1—The corn market has been on a volatile ride thus far this planting season despite seemingly favorable crop growing conditions. At this time, corn plantings are completed well ahead of the normal pace. Early plantings rains caused havoc on traders as initial concerns waned over planting progress. However, conditions dried significantly for the balance of the crop to be planted in a timely manner. In early June, corn was 85 percent emerged, 8 percent ahead of the five-year average. Historically, an early-planted crop has a strong tendency to produce above-trend yields and increase additional planted acres. In 2004, when plantings were ahead of pace, planted acreage increased by 1.96 million acres from the March USDA report to the final USDA report.
In the May supply/demand report, the USDA increased the projection of the 2006-'07 corn yield from 147.9 to 149, which led to a 10.550 billion-bushel production estimate. The USDA is projecting its ethanol corn usage at 2.150 billion bushels versus 1.600 billion bushels estimated during the current crop year. Exports will be a key issue in the demand part of the equation. Exports are expected to increase by 125 million bushels amid a reduction in global competition and lower global feed wheat supplies.
Overall the trend has been set for producers to add corn acres into 2007 and 2008 with current deferred pricings. The market will anxiously await the June 30 plantings report and obviously keep a close eye on weather in the months to come. New crop corn prices should be well supported in the $2.60 area, but any weather concerns could buoy prices much higher.
The chart above, illustrates historical planting intentions from March to June, according to the USDA. Traders are expecting to see a +/- 1.5 million acreage increase in 2006.
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