Potash (NYSE:POT) Up on Lower Corn Yields

The corn crop in the U.S. is ending up lower than expected, and that has pushed up a number of companies, including fertilizer giants Potash (NYSE:POT), Mosaic (NYSE:MOS) and Agrium (NYSE:AGU).

That doesn't seem like it'll have any effect on the offer of BHP Billiton (NYSE:BHP) bid for the company.

Agricultural equipment makers like Deere (NYSE:DE) have also moved up some, although they have pulled back some after the initial push.

Overall the harvest is expected to end about 4 percent lower for corn, although estimates are almost 25 percent lower than earlier projections.

Corn Prices and Iowa Corn Outlook

Corn prices soared to the 30-cent per bushel limit to $5.28 on the opening of the Chicago Board of Trade Friday after the USDA lowered its estimate of Iowa’s per bushel corn yield from 179 bushels per acre last month to 169 bushels per acre.

Soybeans soared as well, rising 70 cents per bushel to $11.35. Both corn and soybean prices are at their highs for the year.

The corn yield estimate, if confirmed in the final post-harvest tally by the USDA in January, would represent a 7 percent drop from the 2009 harvest.

Last year Iowa farmers averaged 182 bushels per acre.

The USDA lowered its national per-bushel estimates from 162.5 bushels per acre to 156 bushels.

Commodity analyst Arlan Suderman of Farm Futures Magazine called the USDA report “shocking.”

Don Roose of US Commodities in West Des Moines called the report “a game changer.”

“This means that there will be tight supplies and a real battle for corn acres next spring,” said Roose, who added that the price for the March contract on corn could reach $6 per bushel.

Des Moines commodity broker Tomm Pfitzenmaier of Summit Commodities said “the USDA was expected to lower their yield estimates, but no one expected them to lower it this much all at once.”

Darin Newsome of DTN in Omaha called the USDA report “extremely bullish for corn, with a possible limit move. Domestic ending stocks to use are the second lowest on record. Soybeans and wheat also saw bullish numbers, leading to expectations of large gains in all three grain markets.”

Iowa is the nation’s largest producer of both corn and soybeans. Together the two crops contribute about $15 billion in cash to Iowa’s economy.

The report and surge in grain prices made itself felt on the stock market. Deere & Co., Iowa’s largest manufacturing employer, was up $4.24 per share to $76.14. Monsanto, owner of the DeKalb and Asgrow seed lines and whose stock has been under pressure this year, rose $2.37 in early trading. DuPont, owner of Johnston-based Pioneer Hi-Bred, was up 44 cents per share to $46.67.

While the higher prices for corn will help farmers make up financially for the lower yields, the increased grain costs will work against the margins for Iowa’s hog and cattle producers as well as the state’s 40 ethanol plants.

Livestock producers are enjoying their first profitable year since 2007, predicated on both better market prices but also moderate corn prices. Record corn prices in 2007 and 2008 triggered three years of losses for hog and cattle raisers.

The higher corn prices had a predictable effect on cattle prices. Feeder cattle, those six months of age or older who are sent to feedlots to be fattened, were down $2.57 per hundredweight to $106.55 in early trading in Chicago.

This year’s corn and soybeans crops were hobbled by record rainfall in July, which flooded many plants just as they were pollinating. Then an unexpected cold snap in late July interfered with some pollination.

Because crops were planted earlier this year during mild weather at the beginning of April, the Iowa corn harvest had begun earlier than usual.

The smaller crop raises the specter of short supplies. Dick Gallagher of Washington, chairman of the Iowa Corn Promotion Board, said “I think, even with the slight down tick, I am confident we have the corn we need.”

Concerns about the supply of corn due to the poorer harvest had driven up the price of corn from $3.45 per bushel in June to above $5 per bushel last month. Then a week ago the USDA reported 300 million more bushels of corn in storage from last year that hadn’t been reported previously.

The USDA said that the nationwide corn harvest would be 12.7 billion bushels, down 4 percent from 2009.

Weather Driving US Corn Crop Quality Down

The weather continues to be the story for crops across the world, as the U.S. continues to be hit by hot, dry weather for the last couple of weeks, raising questions as to where it'll be at harvest.

Weather patterns aren't expected to change any time soon either, as the outlook is for the same weather conditions to continue.

Quality is the highest concern, as bad weather could lower the level of starch the plants send to the kernal.

Corn futures for December delivery increased 2 cents, or 0.5 percent, to finish at $4.20 a bushel in Chicago, ending the week at a gain of 3.3 percent.

On Thursday corn reached its highest levels since June 15, 2009, going as high as $4.39 on the most-active contract.

The USDA said this week the amount of corn planted this year is lower than projected.

Are China's Corn Imports Short- or Long-Term?

For the first time in well over a decade, China has acquired large quantities of corn from U.S. farmers, importing close to 1.2 million metric tons.

Every time something like this happens, the media catches it and offer the possible narrative of a new age arriving for corn and other grain exports.

There will be only one way to find out, and that is time. China is close-mouthed about the circumstances surrounding the unusual actions they've taken, and part of that is for obvious competitive reasons, but also political ones.

Although China hasn't experienced near the extent of droughts Russia has in relationship to wheat, it has still had a number of them in the nation, which has apparently caused them to be short this year.

The other scenario is whether or not the Chinese population, which is growing wealthier, is increasing its demand for corn through its acquisition of meat.

One final element could be concern over the response of its people if they find out there is a shortage of corn. A couple of years ago riots broke out over higher food prices, and panics are easy to start if people begin to think they may not get food at all.

The official word from Beijing is the imports are based on higher domestic corn prices, adding the grain reserves in the country are enough for the people.

Corn Plunges to Lowest Level in Seven Weeks

Corn plunges as expected, as it was known if wetter and dryer weather was forecast, the price of a bushel would come under pressure, after a period of consistent gains.

Already a number of corn fields, and other crops, have received almost 2 inches of rain, with other expected to get at least 1.25 inches up to 2.5 inches this week.

Over the next week there is no hot weather expected in a sustainable manner, making it almost perfect growing conditions for corn.

“The market is taking out the weather premium after weekend rains boosted crops in areas that had been dry,” said Greg Grow, the director of agribusiness at Archer Financial Services Inc. “Forecasts this week are wetter and a bit cooler than expected.

Corn futures for December delivery plunged 13.25 cents, or 3.3 percent, to $3.94 a bushel on the Chicago Board of Trade, the biggest drop for a most-active contract since the latter part of May.

Ohio Corn Crop Strong So Far in 2010

The corn crop in Ohio has been very strong this year, as a wet and warm spring resulted in the crop taking off in most areas, already reaching as high as 10 feet tall on a number of farms.

Planting season also began early, giving it a head-start on the year. Weather throughout the growing season has also remained humid and warm, providing the best conditions corn could have.

If a moderate amount of rain is the outcome for the latter part of the growing season, Ohio could possibly break their record corn harvest set last year of 165 bushels an acre.

Corn Futures Fall to Earth as Inventory Higher than Analysts' Estimates

Corn farmers got a dose of reality, and analysts egg on their face, as a corn inventory forecast from the government surpasses analysts' estimates.

“People were a little disappointed,” said Greg Grow, of Archer Financial Services Inc. in Chicago. “We had a big rally, so traders are lightening up on some positions.”

With supply being the driving force behind the recent surge in corn futures prices, that pretty much bursts that media-induced bubble, as corn futures dropped 0.3 percent on Friday in response to the news.

On the Chicago Board of Trade corn futures for December delivery fell to $3.9525 a bushel.

Corn prices soared 2.8 percent for the week on speculation the wet weather damaged the crop in the Midwest, because of three times more rain than normal.

Hot Weather Hindering Corn Pollination in Indiana

The heat is taking its toll on Indiana corn, as some corn is standing as high a 8 ft. in the fields, while other is only two feet tall, according to some Indiana farmers.

That could result in mixed pollination as the season goes on.

According to the USDA, the condition rating on the corn crop in Indiana has dropped for the last couple of weeks, confirming the concerns.

Heavy moisture in the spring has also contributed to the heat stress a number of farmers in Indiana are experiencing with their corn. The heavy moisture resulted in shallow rooted plants.

Corn Up on Farmers Withholding Supplies

Farmers in the U.S. have been withholding corn and cash premiums have risen as a result. Demand overseas has increased in the mix as well.

“Farmers are beginning to let loose of some corn and soybeans, but the pipeline supplies have not been replenished” to load ships, said Ron Uhe, a risk consultant for Mid-Co Commodities Inc. “We have a battle for supplies between processors and exporters.”

The corn premium surpassed September futures, increasing by 40 cents to 45 cents a bushel, in contrast to 40 cents to 43 cents a bushel.

Corn futures for September delivery increased 7.25 cents, or 1.9 percent, to $3.855 a bushel.

Hot, Dry China Weather Offering Corn Futures Support

The potential of low supply in the United States has corn prices pushing up, and add to that the hot, dry weather in China, and you have a couple of factors working together to offer corn prices support.

Although not proven yet, the perception that corn supplies will not be near as high as estimated has drawn traders to the market, and pushed up corn prices as a result.

For China, they could end up buying corn from the U.S. if the weather has indeed been as devastating on the corn crop in China as thought.

So for now, corn has entered into a bullish stage, at least until a firmer grip on supply is confirmed either way.

Corn Futures Settle Higher, Continuing Upward Trend for Week

Corn futures finished up again on Thursday, settling at 6 3/4 cents, or 1.8%, higher at $3.77 1/2.

December corn was up seven cents or 1.8 percent, at $3.96 1/4 a bushel.

Much of this is borrowed from concerns over wheat, which could yield less than projected, which would increase demand for animal feed, raising prices.

Expectations that the U.S. Department of Agriculture released on Friday will show a tighter corn balance sheet has increased interest in the corn market.

Colorado Corn Harvest Up 22 Percent Over 2009

The latest estimates of the U.S. Department of Agriculture have Colorado corn farmers increasing their corn harvest by 22 percent over 2009, with projections of 1.2 million acres of corn to be harvested.

According to the USDA report released last week, corn producers in Colorado planted 1.35 million acres of corn this year. That takes into account corn for all uses.

In the U.S., altogether about 87.9 million acres of corn have been planted this year, an increase of 2 percent over 2009.

Concerns over whether or not there will be enough for animal feed has caused wheat prices to move up over the last month.

Corn Up from 8-month Low

Corn conditions were down and corn prices were up, as corn recovered from an 8-month low and three straight days of losses.

The major change affecting prices from a U.S. Department of Agriculture was the condition of corn rated poor to very poor increased from 4 percent to 5 percent from last week.

“Corn got a little bit of a boost in the crop-conditions report” as conditions didn’t improve “like some of the trade was thinking,” said Mike Zuzolo, the president of Global Commodity Analytics. “That may cause some in the trade who wanted to be extra bearish to back off.”

Bumper corn crops in competitor nations has kept the price of corn suppressed over the last year, especially their next two major competitors Argentina and Brazil, who had record corn harvests during that time.

China Buying U.S. Corn

For the first time in three years China has reportedly said it will acquire corn from the U.S., and corn prices rose in response, increasing by 10 cents for the week.

Confirmation of the assertion China is buying U.S. corn has yet to be made, which says China has acquired 4 to 5 cargos of corn for June-July shipment.

If that's found to be true, it could offer some support for corn going forward.

Other important news in the corn market was the release of the corn planting progress report, which revealed 50 percent of the crop has been planted, and 7 percent so far has broken ground.

Corn Products International (NYSE:CPO) Earnings Rise

Corn Products International (NYSE:CPO) enjoyed a solid first quarter as all markets the company serves were up.

Sales were up 12 percent while the North American market increased revenue from $531 million last year during the same quarter to $541 million this quarter, a gain of 2 percent.

Profits in the quarter grew from $16.8 million, or 22 cents a share last year, to $43.4 million, or 57 cents a share the first quarter.

Currency exchange rates helped the company offset price/product drops of 13 percent.

Archer Daniels Midland (NYSE:ADM) To Grow Through Acquisitions

According to Archer Daniels Midland (NYSE:ADM), they've maintained a strong balance sheet in order to be ready for opportunities for a merger or acquisition, their preferred means of growth in the near future.

ADM has been struggling, as their recent quarterly report shows, with sweeteners and starches falling in price, and ethanol and corn syrup expected to continue dropping in price as well.

This is why they are focusing on growth through acquisition, as organic growth looks like it won't be happening until demand turns around.

Smaller Herds Drive Corn Prices Down, Along with Oversupply

Corn surpluses continue to plague the industry as an abundance of corn has flooded the market, while smaller herds has lowered demand.

The ongoing weight of oversupply continues to dominate the price of corn, and it makes you wonder why farmers continue to plant it at such high levels, knowing the supply is outstripping demand.

Corn inventories are at their highest levels since 1987, with an 11 percent increase for the year, reaching 7.694 billion bushels as of March 1.

For the year, expectations from the USDA are corn production should reach 13.131 bushels from the 2009 crop.

Huge Corn Harvest Cuts Prices

Corn Inventory

Corn has suffered a similar fate as wheat, because exports are low and the harvest is high.

Corn exports are expected to fall by a huge 100 million bushels, as countries are successfully growing corn, and that is decreasing the demand globally, as it is with wheat.

The corn stockpile is projected to reach about 1.799 billion bushels after harvest, a major leap by 60 million bushels over the former estimate made by the USDA, which hasn't done a great job this year in accuracy, to say the least.

To put this into perspective, corn inventory has only surpassed 1.8 billion bushels four times in the last two decades.

Some are touting a resurgence in ethanol as a potential savior for corn in 2010, but that's very unlikely, as the economy is far from recovery, no matter what the official government line is.

Wheat is also expected to be cut back by about 10 percent in seeding next year for similar reasons as corn, but many of those farmers are expected to put that acreage into corn, putting more pressure on a larger harvest.

With corn exports continuing under pressure as other countries increasingly supply their own, and a slow economy not having the strength to push ethanol forward, I don't see a great year for corn in 2010 either.

Corn Inventory

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Ray Esally

Gary Thomas

Tommasino Conito

Allen Nine

Kyle Simon

Jim Stevens

Bushels of Corn Author Team

Bushels of Corn Author Team



Ray Esally

Gary Thomas

Tommasino Conito

Allen Nine

Kyle Simon

Jim Stevens