Allendale may have their own reasons, but it's hard not to get nervous with the supply & demand picture.
Soybeans will have larger ending stocks than at any time going back at least 20 years. By a lot.
Corn, on the other hand, will have the second smallest ending stocks going back 20 years, and a disappearance that's advancing at some 5% per year. We will likely have 1200 (M) bushels less than last year but will be using 500 (M) bushels more. And those numbers are based upon the USDA which occasionally makes substantial adjustments. For the 06-07 crop year, here are their ending stock estimates in each month's WASDE report going back to last September.
1220, 996, 935, 935, 752
In other words, the USDA is projecting roughly half as much in stocks than they were just a few months ago? The trend here isn't good.
You also have a subsidized ethanol industry that can afford to pay $6-$7/bushel for Corn. Even if they're not selling much ethanol, they're still strongly incentivized to build plants and produce the stuff.
On top of all of that, Export sales are racing WAY ahead of the average. On average, we sell about 50.7% of the USDA's seasonal forecast by this time of year. This year, however, we're at 60.8%. Contrast this to wheat where, as soon as the price spiked, all the buyers went away. In Corn, the price rallies 30%, and we sell MORE of it!
So, the USDA is continually lowering its ending stocks projection; there is new, irrational, price-insensitive long-term demand; and we're exporting the stuff at dramatically faster a pace than anyone expected.
I'm not a raging corn bull, but I need to find a reason to bet against it long term. I like the Long Soy, short Corn spread--the price ratio of corn to soy is at an extreme high. If you were a farmer, and ignoring crop rotation issues, why would you plant any soy at all if you can make dramatically more planting corn? Massive ending stocks have a way of correcting themselves.
I'm not Allendale, and I'm sure they have their own reasons, but I hope that was useful.
