Corn

U.S. Securities & Futures Corp.
100 Wall St. NY, NY 10005 Tel (800) 818-9588 © Peter FiotiSept, 96

SUPPLY FACTORS

Late plantings and poor weather thus far have slowed growth. As a result, fields in many Midwest areas are so far behind they probably won't reach maturity before frost normally ends the growing season in October.

US corn supplies have shrunk to the lowest levels in 48 years due to a string of mediocre harvests and booming demand.
Last year's crop shortage may not be offset by anything less than an optimum harvest this year.
Corn is now in such tight supply that some commercial farmers have found wheat more economical for raising livestock.

Based on the recent USDA survey the government is projecting next years supplies wont fall below 523 million bushels
That figure is only half the level that many economists consider adequate to cushion the nation from shortages.

FUTURE DEMAND EXPECTATIONS

New third world affluence is changing the tastes and diets of its populous. The current trend towards diets of higher meat consumption will increase the need for grains to produce the livestock needed.
China, a large exporter in past years, is now a net importer and should continue to be. This is in part due to an increase in population and a decrease in acres planted.

TIME / PRICE
Due to the abundance in supply, there is a tendency under ordinary conditions; for seasonal agricultural commodities to reach their lowest annual prices just prior to; or during harvest time. This is usually followed by a rally in prices as the supply is absorbed by the market.
INFLATION VS PRICE Over the last 20 years we have seen steadily dropping corn and grain prices. When adjusted with inflation this amounts to approximately a 40% decline in the value of corn.

MARKET VIEW
Going into the harvest season, it seems as though the market is a bit overwhelmed with optimism. The seasonal drop in prices has brought corn prices down from their April highs of $5.25 /Bu to well below $3.75./Bu. World grain supply is however now at long term lows.. There is limited capacity for increased production and without excellent weather, this seasons poor plantings are unlikely to produce the optimum harvest needed to keep pace with current demand. It is our opinion, that with the expected increase in demand and the possibility of a poor harvest, this year's seasonal after harvest rally may provide a potentially under valued corn with the momentum to again touch the $4.50 to $5 /Bu range. We believe the current drop in prices will present numerous buying opportunities to potentially take advantage of such an event.

CONTRACT SPECIFICATIONS

Hours ET 10:30 - 2:15
Size 5,000 Bu
Quoted ¢/bu.
Value 1/4¢/bu=$12.50
Daily Limit 12¢/bu
Months H,K,N,U,Z
Initial Margin I $810 M $600

charts courtesy of Excel
Price information from Future Source and Knight Ridder & USDA
If you have any questions about futures trading, our firm, or this report please call
1 (800) 818-9588 ext. 220

or mail to Peter Fioti @wallst1@bestweb.net

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