The Hueber Report

For several years now, the corn market has been living in the shadow of the much more sexy and exciting bean market.  It seems akin to stories of sibling rivalries or the age-old accusation of mom liked you best.  Maybe not quite the extent of Cain and Abel, but here we have had beans playing the international darling, traipsing around the globe being courted by the Chinese and others, while old reliable corn just stayed at home, consistently producing solid production results year in and year out with everyone just assuming they will always be there.  Boring, dependable, and maybe just a bit paunch around the midsection.  Be that as it may, we may finally be seeing that little by little begin to shift and the report from Uncle Sam yesterday would appear to have provided another bit of encouragement.  If there were any surprise in the March report, it was the 225-million-bushel boost in corn usage and the corresponding cut in ending stocks by like amount.  I have maintained for some time that many commodity markets have been focused solely on supply and in the case corn, a growing belief that the crop itself is impervious to weather issues, they have ignored the expansion in demand, which has been substantial.   Over the past decade domestic corn usage has grown by 16% to a record 14.82 billion, and with this latest update, the stocks to usage ratio has dropped back to 14%.  Even more impressive are the global numbers as over this same period global demand has expanded 39% and the stocks to usage ratio has dropped back to 18.5%, which is the lowest level in four years.  As my associate Jake Wiener pointed out yesterday, with an average yield, this coming year we would realistically need to plant 91 million acres of corn to keep the ending stocks above the 2 billion mark.  Of course, we shall see what the USDA has found out for an acreage estimate at the end of the month, but the preliminary private estimates have been in the 88 to 90-million-acre range.  Needless to say, this is not even considering the risk of the growing season that lays in front of us and with a large swath of this nation sitting in a drought scenario, the bar has been raised even a bit further. All told, I have to believe that the corn market is poised to move out from the shadows of beans. We will see who mom likes best now. 

Of course, looking at the market performance today it would be challenging to believe there was anything positive in the reports yesterday buy we were due for a corrective breather.  While South America could yet produce some fireworks, I suspect we could have grain and soy markets that we will remain overall directionless until we can begin to build North American weather concerns into the equation.