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Current Marketing Thoughts

RSS By: Kevin Van Trump, AgWeb.com

Kevin Van Trump has over 20 years of experience in the grain and livestock industry.

Three Things You Need to Know About Corn...

Dec 23, 2013

Looking Back: Remember, last year at this time the DEC13 corn contract was trading just under $6.10, this year the DEC14 contract is trading at around $4.60.  What makes it so difficult is the major inputs have not pulled back nearly as much. Land prices, seed prices and equipment prices still remain at or near last years levels. This now puts many producers right at or near break-even levels for new-crop. For many producers still holding old-crop supplies, cash-prices are now about $2.50 to $3.00 per bushel cheaper than last year. If you are wanting to know, the DEC14 contract high was posted back on Sept 19, 2012 at $6.14, the low was posted on Dec 16th of this year at $4.47^2.  

Corn Acres? There has been a lot of talk as of late regarding 2014 acreage.  The USDA will give us their first 2014 production estimates at the end of February during their "Ag Outlook."  Many analyst however are already throwing their hat in the ring.  From my perspective I don't think corn acres are going to be as low as some are thinking.  Remember, there was some 3.6 million acres of corn that supposedly didn't get planted last year, that's on top of the 95 million plus corn acres that did get planted last year. We also have to take into account about 1.6 million acres coming out of CRP ground and an additional 4.7 million acres of various crop ground that went unplanted as well last year.  Net-net we are talking about almost 10 million acres that need to find some type of home.  For this reason I suspect we still see a hefty number of corn acres go in the ground. Planted corn acres between 92-93 million would NOT be a surprise.  Unfortunately, this is not a number that will excite the bulls. Therefore my thoughts are the market will continue to grind lower until prices have reached a level that discourage producers from planting so many corn acres. Unfortunately the grind could continue until prices fall far enough to get US plant4ed corn acreage sub-90 million.  

What About A Rally? There has been a lot of talk about a short-covering fund induced rally hitting the corn market?  If you look back in history the corn market tends to most often post its "winter rally" high by the second or third week in January. I wouldn't be surprised to see something similar this time around. If you have been waiting on a rally, the next 2-4 weeks might be your window of opportunity (small, but none the less a rally). Technical bulls traders might argue for a more robust rally on the merit that the corn market rarely ever trades or makes a "V-shaped" bottom.  Meaning prices in the past have tended to push lower, then rally back (20-40%) before reversing and posting their absolute low. This time around we have yet to see that historical pre-low bounce. For those with very little 2014 priced, lets hope that "bounce" comes sooner rather than later...                                     Click Here for all my grain comments in my daily report....            

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