Farm Futures
   Search Site:  Search Site Friday, May 24, 2013 | Bookmark This Site   
Skip Navigation Links
Home
Markets
News
Weather
Farm Futures NOW!
Magazine Online
RSS News
Mobile
Subscribe
Reprints
Register
Login
About Us
Advertise
 
  • Post to Your Wall.
 

Weekly Corn Review

Risk management remains name of the game.
Bryce Knorr 
Published: May 24, 2013

It's the time of year when farmers like to talk about "gambling stocks." But while this phrase typically is used in connection with old crop, it's also prudent to make sure you're not taking excessive risk with new crop corn you hope to raise in 2013.

December futures couldn't hold its April lows this week, breaking on news farmers planted some 42 million acres of corn in a single week. Then the market was able to reverse higher, with divergence on the daily chart also suggesting at least a short-term bottom.

Still, the Dec chart is far from bullish long-term. Every new low this year was met with the same divergence, and it didn't do more than provide a brief respite before selling resumed. If futures can get over their 50-day moving average around $5.425, the 100-day average and a long-term channel line will come into play around $5.60. That's just a nickel below the Revenue Protection base price and growers who don't have bushels above their guarantee priced should use that type of rally to get this initial coverage on.

Risk management remains name of the game.

Risk management remains name of the game.
Last week we mentioned buying out of the money calls on a break, which for now looks like it's over. One alternative to consider would be the short-dated $6.50 September new crop calls for a nickel or less. If adverse weather develops this summer – or if a wet end to the plant season really chops acreage – these would provide additional protection through the August USDA crop estimate for making sales.

Short-dated September new crop puts also could be used to guard on the downside. The at-the-money put is running around 31 cents, a cost that will creep higher on rallies. One alternative for grain that is headed for storage would be to sell a deep out of the money July 2014 call, say the $6.50, to pay for the put. This is marginable but caps the selling price with a hedge that would be profitable.

Is such concern needed? History suggests tight old crop stocks increase potential for rallies, and 2013 so far has been less than ideal. But farmers probably will still wind up planting a whole lot of corn this spring, regardless. Demand will improve, but feeding is the only source of consumption with much upside. Ethanol is no longer a growth industry, though it provides a great base of support. Exports should recover, but even though my forecast is more optimistic than USDA's, sales don't look likely to explode unless China suffers a bad crop. The growing season there isn't ideal either, but so far there's no cause for real excitement.

That's why I don't believe growers should get too carried away with the 2013 "gambling stocks." Adding protection from the ACRE farm program to crop insurance takes away a lot of potential for a train wreck. But blindly believing prices will rally takes more faith than I have. Getting significantly past the RP base price will take conditions that convince the market that 500 million bushels of production potential have been lost. It could happen, but I wouldn't recommend betting everything on it.

Another alternative is to get started with 2014 crop sales. Red December is testing its 100-day moving average after four times holding a test of its $5.30 base. Selling 5% to 10% up to $5.80 may look good a year from now.

For more on this, download my weekly Corn Report using the link below.

Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.


Download file: WCR052413.pdf
Size: 3655.382 KB (Kilobytes)
Created: 05/24/2013 04:07 PM
Last Modified: 05/24/2013 04:07 PM
Click here to download this file.



Permalink: Click here

Tagged: usda, crop insurance

Comments
Read comments from others and share your own thoughts.
Please provide the answer to the following question:

 = 
We need to spend less money on production and more money on storage bins.
Anonymous on 5/13/2013 8:17:00 AM
Yes, there was a week of bad data. Unfortunately, it's a fixed chart and I can't correct it. --Bryce
Anonymous on 5/6/2013 8:32:00 AM
Bryce, On the world corn prices charts in the Weekly Corn Review, is the Ukrainian Corn a bad data point?
Anonymous on 4/16/2013 11:37:00 AM
you farmers should have farmed in the in between war years. Hilary Clinton made 2.4 million in four days shorting the fed cattle market, with 50 cattle contracts in the dairy bonanza days of 1980. Guess who lost!!! the family farmer cattle feeders,in there nievetie. thene the tit for tat trading war of pre NAFTA CAFTA RAFTA AND every other free trade agreement of slick Willy C . thanks to Newt Ginrich and Monica Lewinski fame. So you thhin usda is bad at reporting now! wait until Martha Stewert get a hold of you, or do I have to draw you a picture!!!!!
Anonymous on 4/10/2013 11:26:00 PM
People don't always realize it, but we started rationing demand last June/July. We imported wheat. We imported milo. We imported corn. We closed 32 ethanol plants entirely. We slowed down many of the other plants. We fed a higher percentage of DDG's in feed rations. There is more corn!
Anonymous on 4/4/2013 9:46:00 AM
Brock has either shorted the market or is an idiot.
Anonymous on 3/26/2013 9:32:00 AM
Brock was right. It looks like it is over for corn. Harvest could be as low as $4.50 in the country. Brokers around here are taking as high as $2.50 basis.
Anonymous on 3/8/2013 9:32:00 AM
we need more great comments like this. neal weintraub
Anonymous on 1/20/2013 4:22:00 PM
Ddd
Anonymous on 1/19/2013 1:57:00 AM
Corn and soybeans are going to crash due to South American production. williamwandrews@bellsouth.net
Anonymous on 12/2/2012 8:59:00 AM
An organized Farmers Strike would work just fine...
Anonymous on 11/15/2012 10:52:00 AM
It all boils down to the USDA trying to keep food prices cheap especially in an election year. I am a grain farmer and a cattle producer and the mysterious pink slime case that hit the market right when beef was at it's high was not a coincidence. We had to sell about 300 feeder calves that week and it costs us over $100/hd from what we got just 3 weeks before. I don't know who is going to take the chance to make a dollar farming if they keep take tampering with the markets.
Anonymous on 10/22/2012 7:55:00 AM
I agree with the hilfarmer also,until the usda can control the weather they should keep there thought to themselves. The farmer himself does not know for sure what he is going do to next year. A lot of my friends has been hurt from these false reports. farmer
Anonymous on 10/20/2012 7:49:00 AM
Hillfarmer is right! The USDA has no business giving wrong acreage reports and wrong yield projections. Those "mistakes" cause farmers to sell too low and magnify the risk they encounter with drought. Once again, the market traded early on this erroneous information, farmers were stuck with the market prices throughout the year and now those prices have increased the losses that farmers will experience. I would argue that the USDA did as much damage as the drought; maybe more, since it scared farmers into forward contracting bushels and taking on production risk they might not normally have taken on. Now, having damaged the farmers, USDA rides in on a white horse and gives farmers below-interest loans so they can double down and pay off their contracts with loaned cash. USDA should stick to administering school lunches and stay out of the ag marketing projection business. What is their motivation for ruining markets for producers?
Anonymous on 7/23/2012 8:35:00 AM
Sorry to take so long responding. The selling ranges are what the model says is the range form one to two standard deviations above the average -- which covers 95% of the expected price range given all the data we currently know. This range is essentially the "top one-third" of the price range. This is a moving target, and changes from week to week along with the data. I plan to provide a better explanation on a footnote to the tables -- it's on the to do list. -- Bryce
Anonymous on 3/13/2012 6:51:00 PM
How should "This Week's Selling Range" be interpreted on the balance sheets?
Anonymous on 2/21/2012 8:39:00 AM
I agree corn prices have been bouncing all over the place and making it hard for us farmers to know when to cash in....
deereman 47970 on 8/26/2011 9:35:00 AM

Why does the government give wrong acreage reports in the first place?  With the acres being certified with FSA and crop insurance acreage reports and computer technology the government knows how many acres are planted by the middle of July.  There is no excuse for changes in planted acres in the following months.


Hillfarmer on 10/14/2009 10:34:00 PM
 
Search this site:   

Read More Stories
7 Things You Might Have Missed this Week
Read this storyImpressive planting progress, country of origin labeling and a moveable 'rain' shed
Read this story

CBO Releases Cost Estimate for House Ag Committee-Passed Farm Bill
Read this storyCongressional Budget Office estimates Farm Bill will fall short of projected $40B in deficit reduction
Read this story

Grain Futures Pull Back After Rally
Read this storyProfit taking featured ahead of the holiday weekend and a nervous forecast for corn planting. (Audio)
Read this story

   
Morning Market Review by Bryce Knorr
Afternoon Recap by Paul Burgener
Senate Farm Bill Debate Marches On
Grain Futures Pull Back After Rally
USDA Retains Country of Origin Labeling Requirement
Livestock Call by John Otte
Weekly Corn Review
Weekly Fertilizer Review
NASS Preps to Take Stock of Crops, Livestock
Sugar Policy Dominates Farm Bill Discussion
Top 50 Tags
2008 farm bill 4-H American Farm Bureau Federation American Soybean Association animal health biofuel biofuels BSE checkoff Corn Belt crop insurance department of agriculture Drought dryland Environmental Protection Agency EPA extension service farm bill Farm Bureau farm programs farm progress farm progress show Farm Service Agency farm show farmprogress farmprogress.com farmprogressshow farmprogressshow.com FFA Food and Drug Administration free trade agreement hay expo House Agriculture Committee husker harvest Husker Harvest Days huskerharvestdays.com livestock livestock producers National Cattlemen's Beef Association National Corn Growers Association NCBA NCGA New York Farm Show Progress show Senate Agriculture Committee soybean association the farm bill usda winter wheat www.farmprogress.com