When last we check in on corn, the USDA had announced the second-largest corn planting season ever, sending prices into a tailspin.
Today, Morgan Stanley's Hussein Allidina says a rebound is imminent.
"We note that, with the exception of Minnesota, the cornbelt states in better-than-average condition are also the states in the lowest quartile of both yields and annual production," he writes. "The three highest-yielding corn states in the US (Iowa, Illinois and Nebraska) all have crops with Good/Excellent ratings at least 5% below their respective 5-year averages."
Corn is currently trading around $6.10 a bushel. But Allidina says dry conditions could elicit a negative production surprise that would send the December contract near $7.
"While we continue to model 2012 corn planted area at 95.4 mln acres, we note that even with higher acreage, yields will need to perform to keep US supplies adequate...a 155 bu/acre yield — the third highest yield ever seen in the US — on 96 mln acres would still leave US S/U at a precarious 6.5%. As the crop moves into the silking stage under declining soil moisture conditions, this scenario appears less remote."
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