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Corn Market Brings a Second Chance

March 26, 2011

 

Even though the May corn contract closed down 13 cents/bu. today, the price is still nearly a dollar higher than it was just 10 trading days ago, says Jerry Gulke, president of the Gulke Group.   This offers a second chance for producers who have crop insurance to sell the February average.

"Now we’re back up. Rarely, if the market has gone south, does it ever give you a chance to do what you missed before.  A lot of farmers jumped back in and covered the 15-20% they didn’t have covered under crop insurance before. For me, I think I want to have my non-insured crop covered by the market and use that insurance as a tool."

This does leave a lot of downside risk, Gulke admits. The 85% of the crop that is covered under crop insurance isn’t protected until the corn price reaches nearly $5.10/bu. "The risk isn’t over yet just because you have insurance."

Focus is now turning to next Thursday’s USDA Planting Intentions and Grain Stocks report. The key will be in the Grain Stocks report. If the report shows that stocks are higher, then that may show demand was curved at lower prices levels. Then, perhaps this long run of high corn prices could be over.

If it shows that carryover is projected at 640 million bu. or less, it could be kitty bar the door. "A couple hundred million bushels is a 1.5 million acres. What the end user wants to have going into the summer is a comfortable cushion. You can work with the numbers that you know, but you don’t want to get into a position where weather can be the only factor. We can’t prepare for that."

Even if next week’s reports come in bearish, the market could still look at the fact that much of prime corn growing region is covered in snow with no significant warm up on the immediate horizon. If that happens, planting delays could happen and corn acres could be abandoned. 

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