Buy On Locust Dinner Day...

Is the old adage about buying on Locust Dinner Day and selling on Gafta Dinner Day likely to come true again this year?

The Locust Dinner was held on Friday in Liverpool, as many of you will know, so does that mean that we should see current prices as a buying opportunity?

As you may recall, I wrote last week that there is a strong seasonal trend for both corn and soybeans to put in a bottom in February. With a particularly enormous soybean crop on the way from South America, it may be that corn possibly is more likely to be able to find a way up from current levels than beans.

The US EPA last week potentially opened the door for more corn demand from the ethanol sector, saying that the use of corn ethanol does indeed reduce greenhouse gas emissions by 20%. They are now expected to go one stage further and authorise the use of the so-called E15 ethanol blend sometime later this year. That will increase the maximum inclusion rate for corn ethanol in fuel sold at the US pumps from the existing 10% now to 15%.

Now that the market has settled following a spectacular January decline following the USDA's Jan 12 crop report, it may be a case of all the bad news being out in the open for corn.

Even with the USDA's shock increase to American corn production in 2009/10, the world corn crop was still only pegged 0.6% higher than last year. In addition, although production estimates in South America are seen rising, output there is still well below where it was two years ago. In 2007/08 Brazilian corn production was 58.6 MMT and in Argentina it was 22.5 MMT. The USDA may well be underestimating things with their current estimates of 51 MMT and 15 MMT respectively for this season, but even so we clearly aren't going to return to the levels of 2007/08.

In contrast to that, 2009/10 global soybean production is currently seen rising by 20% on last year with record output from all three of the major exporters: the US, Brazil and Argentina.

World corn consumption meanwhile is seen at a record 806 MMT this year, 31 MMT or 4% higher than a year ago, reducing ending stocks by almost 10 MMT.

There is also the possibility that the USDA did indeed overstate US corn production numbers last month. Throw that into the mix too, and it's not that difficult to make out a modestly bullish case for corn, even if US farmers do plant a few more acres this year.