Corn prices rally, old-crop corn slow to move

By Hope Deutscher | July 08, 2009
Report posted July 31, 2009 at 3:27 p.m. CST

Corn prices rallied a bit this week, however, according to Brock Associates Inc., as of June 1 on-farm old-corn stocks totaled more than 2.2 billion bushels - approximately 52 percent of the total U.S. corn stocks and it appears that many of the 2.06 billion bushels of corn in commercial storage were also still owned by producers.

"It's difficult to track but it does not appear that from June 1 to mid-July that a whole lot of corn was moving," said Doug Houghton, assistant editor and an analyst with Brock Associates. "People were holding for into the weather season, and in mid-June the market collapsed and a lot of people, farmers being stubborn, didn't want to sell it at lower prices."

In its June 30 closing market report, Brock Associates said corn futures surged to double-digit gains on support from a sharp rise in soybean prices, continued strong export sales and a jump in optimism about the general economy. Further, the Brock Report stated "December futures have established good support in the $3.10 to $3.20. The question is how far the market can rally with a big crop on the way. The market remains in a long-term downtrend, but December downtrend line is well above $4.00, leaving lots of room for a near-term rally...The market's 40-day moving average may also provide resistance above $4.06, but the long-term trend-line is more than 40 cents away at about $4.31."

That rally is likely going to change things, Houghton said. "The thing is how much old crop corn are we going to bring out here on these higher prices?" he said. "Technically, the corn market looks like it's going to move higher here in the near term but we still anticipate further weakness at harvest. What we should get is that the old corn crop moving should limit any rally that we get here over the next several weeks."

A contributing factor to the old-crop corn stocks is the fact that ethanol plants throughout the country have either been reduced or idled in the past year as a result of economic conditions, coupled with higher corn prices.

Farmers in the western Corn Belt have crops that have started to already move because the new crop of corn is farther along and projections are for some bigger yields in that area. However, in the eastern Corn Belt, the crop is behind and there isn't an immediate need to move the old corn crop. Houghton said because of the rally, some people are going to sell but others will continue to hold until they see the August 12 USDA crop report numbers.

In response to variable weather conditions in key crop-growing regions, the USDA National Agricultural Statistics Service announced July 22 it is collecting updated information on 2009 acres planted to corn and sorghum prior to the August 12 Crop Production report. The June 30 Acreage report included estimates of 2009 planted area for principal crops, based on data collected from producers in early June. NASS said to ensure that the August forecasts accurately reflect any changes in planted acreage since June, it will expand its routine data collection activities in late July and early August. The agency will ask growers in Illinois, Indiana, Kentucky, Missouri, North Dakota, Ohio and Pennsylvania, to update their reported acres planted to corn.