CORN: Record High Fertilizer Price May Lower Yield and Cause Less Acres
The USDA report news was bullish, especially for the new crop season. US corn planting intentions came in at 89.49 million acres versus an average trade expectation of 92.0 million and a range of expectations from 90.0 to 93.5 million. March 1st corn stocks totaled 7.850 billion bushels versus an average expectation of 7.880 billion. If we plug in the new planted acreage estimate, and assume beginning stocks at 1.350 billion bushels, and use the USDA Outlook forum yield of 181 bushels per acre, then ending stocks come in at 1.575 billion bushels. However, with less fertilizer usage, traders might use the previous record high yield of 177 bushels per acre. This would leave ending stocks at 1.238 billion bushels with an 8.2% stocks/usage. This would be the tightest stocks/usage since the 2012/13 season. However, if we use a simple five-year average yield, ending stocks drop to just 969 million bushels with a 6.4% stocks/usage. This would be the second tightest stocks/usage on record. Frosts in recent days, especially in Buenos Aires province, may curb yields for late-planted crops, the Buenos Aires Grain Exchange says in a weekly report.
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The weekly export sales report showed that for the week ending March 24, net corn sales came in at 636,852 tonnes for the current marketing year and 286,800 for the next marketing year for a total of 923,652. Cumulative sales have reached 84.5% of the USDA forecast for the 2021/2022 marketing year versus a 5 year average of 81.0%. Corn used in last week's ethanol production is estimated at 105.2 million bushels. Corn use needs to average 100 million bushels per week to meet this crop year's USDA estimate. Ukraine has stocks of 13 million tonnes of corn, but cannot export the grain as seaports are blocked due to the Russian invasion. Spring planting of corn, soybeans and sunflowers will drop “at least 30%” in Ukraine because of the war, says the president of the Ukrainian Agrarian Confederation. Overall production of the spring-planted crops will drop “at least 40 to 45%” and depend on supplies of fertilizer, pesticides and diesel fuel, all of which are in short supply.
MARKET IDEAS
The surge higher in fertilizer prices to a new record high may be the key factor to limit corn planted area. The market posted new contract highs. July corn support comes in at 726 1/2 and 720 ¼, with 767 ½ as next upside target. December corn support is at 661 1/2, with 699 1/4 and 719 3/4 as the next resistance.