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Weekly Corn Review

Corn faces bearish seasonal.
Bryce Knorr 
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.

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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Tagged: usda, Drought, usda news

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

 = 
Wait until after the market overreacts to the June 28th USDA report, then buy September corn.
Anonymous on 6/8/2013 8:47:00 AM
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
 
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