Demand for corn and soybeans is increasing, but stocks of both crops remain well above year-ago levels, according to data released Tuesday by the USDA.

On the bright side, stocks of both corn and soybeans were lower than expected and demand is fairly strong, according to the June 1 quarterly Grain Stocks numbers.

Looking at corn first, USDA projected stocks at 4.447 billion bushels, below the average trade estimate of 4.555 billion but within the range of expectations. Quarterly stocks of corn are 15% above last year’s 3.852 billion bushels.

Corn disappearance for the quarter at 3.3 billion bushels was 140 million bushels stronger than last year.

“Even though avian influenza set back corn demand in the poultry market, we saw growth from the beef and hog sectors,” said Chad Hart, agricultural economist with Iowa State University. “We also saw really good numbers from the ethanol industry.”

Corn use for ethanol production hit an all-time high last week.

David Fuller's view

When I commented positively on corn and soybeans last Wednesday, too much rain, soaked fields and the need for some replanting were the main features. 

Five market days later, corn, soybeans & wheat have continued their rapid rise.  Moreover, the patterns shown on these weekly charts above all look like base formations which have occurred in regions of prior support.  

Now that short-term overbought conditions are developing, the extent of the next reaction and consolidation will tell us about the medium-term outlook.  In other words, if most of the gains see last week and counting are held during a consolidation, this will not only encourage buyers to remain long but also attract further demand.