The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Corn prices remain at the upper-end of their recent six-month trading range. The bulls continue to talk about strong US demand, coupled with fewer acres and questionable weather conditions. Ethanol margins remain highly profitable and in turn corn used for fuel in 2013/14 has enjoyed a nice jump, from 4.648 billion bushels in 2012/13 to perhaps a hair above 5.0 billion bushels this marketing year. Exports have also seen a massive jump higher, from just 731 million bushels last year to perhaps 1.8 billion bushels this marketing year. Feed/Residual usage up dramatically as well, from 4.335 billion bushels last year, to what the USDA is currently estimating at 5.3 billion bushels. Keep in mind however, the current 5.3 billion "feed/residual" estimate mentioned above is the number being highly debated by the trade, with most thinking it is anywhere from 100 to 300 million bushels too high. Most bears are thinking the adjustment to this number will be made in either the upcoming March 31st Quarterly Stocks report or the June Quarterly Stocks Report. Regardless, bulls are still pointing to the fact total US demand is still higher by some 2.0 billion bushels this year compared to last. From my perspective, this means the corn market might not be nearly as bearish as so many have been predicting. Especially when you consider the political and logistical uncertainties in both Argentina (the world's #2 supplier) and Ukraine (the worlds #3 supplier). Moral of the story, with "money-flow's" renewed interest in commodities, and even though the USDA might magically find some 200 to 400 million bushels in the upcoming March or June quarterly stocks report, I am afraid the trade will need to see just exactly how the US weather plays out before removing much "risk premium." With this in mind, producers should remain patient at current pricing levels. Any major knee jerk reaction lower by the trade, based on next Monday's USDA report, might be an opportunity to reduce your hedges or buyback any premium you may have sold. I just have this hunch new-crop corn prices could eventually make a push back above $5.00. Personally, I am holding off on making any additional sales and have moved my next price target out to $5.24 vs. the DEC14 contract. CLICK HERE for my daily report...
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