With lower U.S. corn acres this spring, continued strong corn demand should reduce ending stocks and lift prices out of their recent ranges, according to Stewart-Peterson Senior Market Advisor Naomi Blohm.
“Low prices the last two years have really spurred demand,” Blohm said.
She said even if corn acres move closer to 91 million acres with good planting conditions, “it still comes down to making sure we have a good crop.”
Some demand concerns exist.
Mexico is looking into options for sourcing corn from South America in case trade disputes occur.
In Wisconsin, the recent issues with a large dairy processer closing suggests the dairy herd could see reductions, but that would likely have a small impact on total U.S. corn demand.
However, with steady demand, lower ending stocks are very plausible, given 90 million U.S. corn acres.
For example, a below trend line yield of 167 bushel per acre would cut ending stocks from the March USDA estimate of 2.32 billion bushels to 1.583 billion bushels, assuming imports and total use remain steady, Blohm explained.
A 170 bushel per acre trend-line yield would reduce ending stocks to 1.831 billion bushels, with steady imports and total use.
Going forward, Blohm said the USDA is likely to stick with their yield estimates “until proven otherwise.”
Like a pot of water near boiling, corn prices have been consolidating for seven months now, she said.
“All we need is one piece of news and there she goes,” Blohm said.
Stewart-Peterson feels strongly that a seasonal June rally is ahead. As of April 7, they were looking at 70 percent odds for corn futures to reach the $4.40 to $4.50 level.
Weather issues could push the price level closer to $5, she said.
Demand also remains “fantastic” for soybeans, but higher acres mean significantly below trend yield will be needed to increase prices, Blohm said.
“Beans are kind of 50/50 right now. I’m ready to be a seller on the rallies,” she said.