Corn futures that held steady last week after the U.S. Department of Agriculture forecast record domestic production may signal price gains, according to economist Dennis Gartman.
Prices gained 0.2 percent on Feb. 24, when the USDA forecast corn output at 14.27 billion bushels and planting may total 94 million acres, the highest since 1944. The grain was up 0.3 percent today at $6.4575 a bushel by 11:21 a.m. in Chicago and is little changed this year.
“Those are egregiously bearish numbers,” Gartman wrote today in his daily Gartman Letter. “Corn futures have held quite well following that bearish news and as we are wont to say, a market that shall not fall on bearish news is not bearish.”
Farm income last year totaled $98.1 billion, the USDA said. Income is expected to fall to $91.7 billion this year, it said on Feb. 13. Farmers have built “enormous” amounts of storage for crops and with the second-highest income on record last year can afford to hold supplies and wait for prices to rise, said Gartman, who wrote that he’s “quietly turning bullish.”
“Simply put, it would be possible for America’s farmers to store nearly all of this year’s corn crop on farm, which of course won’t happen given that on-farm storage is split between corn, soybean hard and soft-red winter wheat, sorghum, et al,” he said. “The pressure to sell grain is falling and their ability to sit tight and await higher prices is rising.”
U.S. feedlots bought 2.2 percent less cattle in January, USDA data show. The U.S. cattle inventory was the smallest since 1952 as of Jan. 1 after ranchers shrank herds as a drought in the south and southwest scorched pastures. In 2011, the total number of calves born fell 1.1 percent to 35.31 million from a year earlier, the lowest since 1950, according to the USDA.
A 45-cent tax credit for each gallon of ethanol made from the grain blended into gasoline expired on Dec. 31. That may reduce demand for corn used to make ethanol, Gartman said.
“That would lead one to believe that feed demand shall fall this year, and so too ethanol demand now that the support program there is ended,” Gartman said. “Nonetheless, corn is holding firmly and we are much impressed by that fact. We think everyone should be.”