Corn Rally: Time to Take Off More Risk?
May 23, 2013
Corn bulls were very excited to hear reports that 540,000 metric tons of US corn had been sold to the Chinese and an "unknown." I am not certain, but this has to be one of the top-15 largest single day corn sales ever announced by the USDA. On the heels of yesterday's rally and the strong basis across most of the US I decided it was time to "SELL OUT" of all old-crop corn. Yes, I may end up being a little early and miss some of the remaining flat-price appreciation, but with most processors being forced to pay between $7.00 and $7.50 a bushel I am worried that the basis could start to eroded and never come back. I believe at best you have a 30-day window for this type of basis: Central MO +$0.95 over, NW IA +$0.59 over, Cedar Rapids IA +$0.70 over, Linden IN +$0.67 over, Decatur IL +$0.60 over, etc...
Q. Kevin, only a few marketing days ago your headline read "HOLD OLD CROP CORN"... what changed???
A. Made that comment on Wed May 15th. We had just rallied $0.30 cents on Monday and at that time the market was testing the $6.60 level... actually looked like we could push through it. Then all of a sudden by this Tuesday we are $0.30 cents lower and testing $6.30. The market seems extremely "uncertain" right now, in return this is making me "uncertain." I have found the best thing to do when you are uncertain about overall short-term market direction is to simply move out of the way. When an animal isn't responding like you think it should, it could quickly become dangerous. Right now, I am not really liking the way this market is reacting and I believe the safest place to watch it play out is from the shore. From my perspective, bank the $7.00 plus corn profits and let someone else try and tame this wild ride.
If you want to get the rest of my detailed thoughts on how volatile these markets have been, click below to get my report.