Last Friday, price of corn surge the most in the recent three months. The unexpected low inventory data is the main reason that causes big jump in corn price. This is a strong signal that the demand of corn is maintain strong recently. The corn price is likely to rise again in the short-term. Before the report published, corn price retreat to 11 weeks lowest point. There is no doubt, the market have already reacted with the drought in US mid-west. However, an unexpected inventory level reported by USDA give a surprise to the analyst, again.
From supply aspect, the production plus the inventory brings from previous year is 11.872 billion bushels. Compared with that, the demand is 12.33 billion in last year. Referring from the data from USDA and Bloomberg, only twice since 1960 has the supply failed to exceed the consumption from last year.
Besides that, according to the forecast of Bloomberg, the inventory of soybean will reach eight year lower to 130 million bushels from 215 million last year. The consumption of soybean still maintains a strong position. Unfortunately, the drought in South American and Mid West hit the supply hard this year. The supply will be tight in the next 6 months. Although soybean price is in a historically high point, I still expect the price of soybean was expected to bounce in the short term.
Thus, I go long on corn and soybean and expect the price of corn will continue growth in short term.
Reference:
http://www.bloomberg.com/news/2012-09-28/corn-surges-as-supply-unexpectedly-drops-commodities-at-close.html
http://www.bloomberg.com/news/2012-09-28/u-s-corn-stockpile-unexpectedly-drops-sparks-price-rebound-1-.html
Thanks for sharing, Victor! Indeed, we have tight stocks in corn and soybeans in the world market. One thing that I’m skeptical about is whether corn prices is going to sustain high for a while.. and how long is the time frame for short term. We are never sure. For now, I’d probably stay long for corn.. hopefully, prices for corn continues to rise in the next couple days.
Hi Victor,
Can you please do three postings as others do? You should do postings about “what went right or wrong”, “another on their plans for the coming week”, and a third discussing new information sources”. Please refer other classmates’ blogs. Thanks.
Thanks for your remainder. I made some adjustment. In my second post this week, I include “what went right or wrong?” and self-evaluation.
In my first post, it is my plan for the coming week and analysis. I also share some cool information source.
Thanks again.^-^