Corn exports remain stronger than many inside the trade had anticipated, despite the strength in the U.S. dollar. Just keep in mind, we will still more than likely export about 5% less corn than we did last year. Corn used for ethanol is hanging in there but might have a tough time reaching the USDA's current marketing year goals. A lot will obviously depend on the industry's ability to export more ethanol and DDGs. I still believe corn used for feed is also a bit high and will need to be tapered back to account for the bird-flu complications. From my perspective, even though overall U.S. demand might be a touch overstated, I don't see "demand" being the major issue or concern weighing on the trade right now.
The bigger concern is that U.S. production could push towards 14.0 billion bushels and ending stocks over 2.0 billions bushels, especially if planted corn acres move closer to 90 million. The bears are arguing that based on the current soil moisture levels and longer-term forecast, the USDA's 166.8-bushel yield estimate may already be too conservative. In fact, if June moisture proves adequate, which as of right now looks to be the case, I suspect we see the USDA move the yield number higher. I personally think it's still too early to make a call on July weather and overall harvest conditions. If some of the forecasters are right on their longer-term projections, we might eventually hear more talk of potential late-season complications associated with too much rainfall and flooding.
As a producer I still want to keep hedges in place, because I'm worried that the early consensus amongst the trade is that we are off to a wonderful start and soil moisture levels throughout the corn belt are rapidly recharging. Many analyst are actually looking for 75% to 80% of the U.S. corn crop to be rated good to excellent by the USDA when we return on Tuesday. If you are wondering, the highest modern day initial rating of the U.S. corn crop was set back in 2007 when 78% was rated good/excellent.
Bottom line: The crop looks as if its in great shape. I see no reason to stand in front of these bearish arguments, they are simply too tough to debate. The upside opportunity looks as if it will have to come later in the game. As we all know,"it's not how you start the race, but how finish." From a technical perspective there's still heavy resistance in the Dec15 contract between $3.90 and $3.95. On the downside, the bears are thinking new-crop prices may test the $3.40 area during the month of June. Stay patient!