Bullish and Bearish Rumors in the Corn Market
Mar 16, 2012
In my opinion, the corn market is also starting to be driven more aggressively by money-flow (funds now thought to be long close to 300,000 contracts). There are valid fundamental arguments being waged by both the bears and the bulls right now, and in my opinion, both seem to have realistic defenses. Personally, I will continue to lean to the bullish side on thoughts of record tight supplies and a smoking gun in China. As I continue to reiterate, I am not wildly bullish, simply because all of the stars are not yet aligned, but I certainly prefer to play the game from the long side of the fence as opposed to the short side.
Keep in mind, we are starting to get up towards the absolute high-end of our most recent technical range. I suspect the nay sayers will start aggressively adding to their short positions in a last ditch attempt to pressure the trade. I would also have to imagine some of the short-term longs will be aggressively banking profits as we approach heavy resistance in the $6.80 range. If your a spec and looking to get long I would remain patient, preferring a technical pull-back or breakout to be a buyer.
The rumor mills are ripe with corn stories this week, below are a few of the highlights and ones that have gained some of the most attention as of late:
Bull Rumor - China's corn shortages are more severe than anyone has been reporting. Government reserves are well below the current USDA levels and China is hiding a major problem. This is obviously evident by domestic Chinese corn surging to new all-time highs even though an estimated 20-25 million metric tons of feed wheat has already been substituted for corn.
Bull Rumor - Reports yesterday were that Sino grain had only bought 1.2 million metric tons of corn from local crops to build reserves. Far less than what they had purchased last year at this time. This stoked the flames in regards to possibly Chinese corn imports, and the further possibility of a miscounted Chinese corn crop last year.
Bull Rumor - Many sources now thinking Chinese corn situation is much worse than broadcasted. Rabobank and many others now thinking Chinese corn imports could reach 10-15 million metric tons in just the next three years.
Bull Rumor - Talk of US ethanol plants out east paying over $7.00 now for corn, several sources thinking despite higher stocks the USDA is still underestimating US ethanol production. As we know this is highly debated.
Bear Rumor - US corn quality is so good that the USDA will soon be forced to lower ethanol usage and feed usage numbers because end-users have been able to get so much more bang for their busk out of each bushel.
Bear Rumor - More talk about La Nina shifting to El Nino and possibly producing much better yields than many analyst are anticipating. Hearing confirming talk from weather guru Elwin Taylor, even hearing some sources now throwing out national yield averages north of 170 bushels per acre. A yield of this size would throw ending stocks over 2 billion.
Bear Rumor - Talk of a warmer winter weather has the bears talking about lower corn feed usage for livestock.
Bear Rumor - Talk of near perfect field conditions in a large portion of the corn belt allowing many producers to impeccable groom and prep fields for what looks to be an early and fast planting. Most generally an early planting leads to a large increase in total planted corn acres.
What does this mean to Producers? As for today, the markets seem as if they will trade on both sides of the fence. It wouldn't surprise me to see a little profit taking, but I have to believe each and every break, especially in soy, will be met with additional buying interest. Look for soy to continue gaining on corn in the days ahead as the world believes US farmers desperately need to plant more soybean acres. As producers we continue to hold and patiently wait for higher prices in new crop corn. We are now about 50% sold in new crop soy and now feel extremely comfortable about waiting for a significant rally to price more bushels. Corn end-users should be covered through late summer, at which point early corn should be available to help ease any shortage that might arise. Be patient locking anything in beyond August.
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