30-60 Day Outlook for Corn Prices
Nov 13, 2012
Corn bulls are obviously concerned about the recent increase in US corn production (about 19 million bushels), plus the significant break in the bean prices, not to mention the "technical" picture becoming a little more worrisome as the late September chart lows of $7.05 may soon be tested. There is also some talk and rumors circulating that Ukraine may start exporting corn to China by year-end as part of a $3 billion loan agreement the two countries inked earlier this year (no specifics have been released, and the numbers don't pencil as of yet, but we should take note they are at least taking steps in that direction). From my perspective, however, it is not all doom and gloom for US corn prices. Argentine weather continues to be a concern and I have to believe more corn acres will eventually be switched to soy production. From what I am hearing out of Argentina, most tend to believe producers are anywhere from 2-4 weeks behind with their corn planting. As a whole, I am hearing Argentina is somewhere between 45-55% planted. Normally we would expect them to be around 60-65% planted at this time. Brazil is also running behind schedule, with most in the trade thinking they are about 60-65% planted, rather than the more traditional pace of 70-75% planted at this time. With this in mind, I have to believe the USDA will eventually have to peel back their 28.0MMT corn production estimate for Argentina (maybe even substantially), as well as possibly reducing the 70.0MMT Brazilian corn estimate. Let's also keep in mind US corn prices are rapidly becoming more and more competitive to South American prices. There are also logistical constraints that may soon be promoting some recent South American corn buyers to return back to US suppliers sooner rather than later. I am not saying we are there as of yet, but corn seems to have a few more bullish stories working for it than either wheat or soybeans right now. Producers with "unsold" bushels should continue to keep hedges in place and patiently wait for higher prices. Those exclusively using "cash marketing" should be much more aggressive sellers on any and all rallies, especially with many in the trade starting to talk about a 2.0 billion bushel carry next year.
I suspect we will start to see a little more end-user interest and global buying of US corn. I also believe there could be another wave of Chinese soy buying on the big price break, especially with their crush margins rebounding substantially in the past several days. The problem is I suspect the bounce will be short lived as many large traders still caught long will simply use the short-term bounce as an opportunity to unload more length. For about the 100th time during the past several weeks... DO NOT CHASE THIS MARKET HIGHER!!! It could bounce for a day, two days, a week, two weeks, I am not sure, but I have to believe we are going to see lower highs and lower lows during the next 30-60 days.
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