Weekly Corn Review
Corn faces bearish seasonal.
Published: Jun 14, 2013
After a June 12 USDA report that provided little support for prices, the next big data dump on June 28, when acreage and grain stocks are updated, is a natural inflection point for the market. But though there's plenty of uncertainty about both acres and inventories, the market may not wait for the USDA news.
Seasonal trends in years of normal production show December corn breaking soon. Most years, of course, don't follow a historic drought with planting delays. But bearish weather that improves crop conditions could break December down towards the bottom of its trading range below $5.20. If the momentum gets going, things could get ugly fast. Speculative hedge funds are already on the verge of turning short. That gives them plenty of ammunition to buy, but also to sell.
Corn faces bearish seasonal.
This week's action suggests the planting rally is over. December futures closed the gap higher after Memorial Day, and never closed above the $5.65 Revenue Protection base price in June. While most traders don't buy USDA's decision to leave acreage unchanged this week, the market seems to be saying it doesn't think enough was lost to provide any incentive for farmers to push plantings much past the prevented planting deadline. My yield is down to 155.6, but it would take a 3.5% reduction in acreage from the June 28 report to generate much of a rally buzz. It could happen, but a loss of 1 million to 2 million is probably more likely. If yield potential starts to improve, that may not matter little.
That would put the best hope for rallies on weather during pollination. So much of the crop got planted in one week that this will be a real roll of the dice. If a blast of 100-degree heat arrives like it did in 1983, it's Katie bar the door for another year. If not, we may find out just what today's hybrids can do under decent conditions.
We previously recommended selling 30% at an average price of $5.96, to make sure bushels above the RP guarantee would be covered. Any move back to the trading range top above $5.60 would be yet another chance to get coverage on or increase sales. The hard part now is deciding whether to add sales at current prices, or wait to sell weakness if the market can't hold May lows. The difference between Friday's close at that $5.12 low is just about the cost of a short-dated September new crop option that expires in late August. Neither is a great deal, but would look good if the market tanks.
The best hope for new crop may come from old. Bull spreading from end users trying to cover needs in a very tight cash market may be a lifeline. But buying September once July goes into delivery will be a lot less attractive for those needing cash corn to ship, feed or process.
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.
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