Summary
Just how small could the US supply of corn become and place end users as well as the supply chain in 2009-2010 in a precarious position? There may not be much help from alternative world suppliers.
Analysis
Allendale Inc is alerting end users as well as producers of the longer range outlook for constricting US and world corn supplies for the forthcoming 2009/10 marketing year. As a unit of measure the days supply of corn after total demand is stripped from the supply, the 2009/10 marketing year estimates corn availability is projected at only 33 days, which is a record low dating back to 1999/00, just under the 34 days the old record of 2003/04.
Alarming is the 15 day (31%) reduction year on year, vs the slight 2 day build the previous year. This is the initial estimate from USDA and without including what is likely to be a yield reduction for corn in the June WASDE. Add to this potential planted acreage reduction when USDA releases its report at the end of month in June as a direct result of poor weather fundamentals in the east corn-belt.
As of May 17th, number two corn producer, Illinois at 20% planted, which represents the slowest pace of planting dating back to 1960 and even slower than the 41% completed during the Midwest floods of 1993.
Equally alarming is the lack of help from major world suppliers such as China, Brazil, Argentina and South Africa. USDA projects the world end stocks 128 million tonnes, down 8.6% year on year. This would imply the world days supply of corn at 53 days, one day lower than the old record dating back to 1999/00 of 54 days for the 2006/07 marketing year.
Just as price friendly encouraging is the tightness in supply for the world producers of corn, may in fact be discouraging for end users. Present grain futures, futures spread between soybeans and corn and cash prices are not projecting the need to buy corn acres as we enter into the last half of the month of May. Possibly a corn rally limiting factor may be found in heavier than usual domestic and world supplies of wheat as a potential starch substitute.
The existing outlook for the 2009/10 marketing year remains supportive to old crop and new crop values and given the less than optimal beginning, this level of uncomfortable is not likely to ease in the near future.
