Where Corn Prices Are Headed
Aug 31, 2010
Corn Price Direction In The Coming Months
There seems to be more debate and concern regarding this years total estimated corn yields than we have seen in many years past. Certainly the concern is warranted stemming from a global wheat problem, strange weather during the growing season, and record demand projected in the coming months.
Iowa Could Be In Trouble
From our perspective it looks as if Iowa is going to be the "swing-state". Currently the USDA has their yields estimated at 179 bushels per acre. From everything I am hearing, this number could be off significantly. With Iowa being the largest corn producer in the US for the past fifteen years, how this number comes in is certain to effect our total yields. If Iowa shapes up like we are projecting and we continue to see problems in this state, I think we will certainly see total yields fall into the 160-163 range as a whole.
I have been receiving many interesting updates from our sources out in the field and I wanted to pass along the information so you could better understand what exactly is happening.
Many of our Iowa boys are singing a similar tune, and many are now trying to figure out just what has happened out in the field. The season started off like gang busters, but in many major growing regions it has taken a turn for the worst. We are starting to hear a tail of two stories as producers in the northwest part of the state are reporting the possibilities of another record setting crop, while those in other areas seem to be less fortunate. Many areas have been battling the big rains and now have growth and fertility problems.
The Scouts Out In The Fields
We have talked with many scouts out on foot and in planes, the story seems to be the same, "The crop in central, north central and eastern Iowa looks horrible and will not even come close to the current USDA estimates." Below is a better synopsis of what seems to be really happening out in the fields. I truly believe once the smoke settles and dust clears the USDA will be forced to drastically adjust in these areas. If everything else plays out as we currently project, price action in this market could get very wild in the coming months as traders jokey for position.
There is no debating the fact that the corn crop is about six weeks ahead of last year. Let me pre-qualify the next few statements by once again proclaiming that I am a professional trader and marketing expert, not a professional farmer or agronomist. I leave the farming to my clients and i take care of what I know, hedging and marketing. Anyway, from what I am being told a huge portion of the corn will be forming a black layer in the next several days. As I have always been told, the plant is supposed to remain alive and healthy until at least a few days after the black layer forms. Then the dry down phase should begin. This year though we have been hearing reports of plant declines starting almost right after the yellowing began. It is now very easy to see form the road and by plane corn plants that are already dead. Reports are that the ears are already spongy and the kernels are shrinking up.
What The Experts Are Now Saying
We have seen reports from a couple of Iowa's top agronomists that they have been chasing several different diseases across many top producing areas throughout the summer. They have told many that they had never seen so many problems over as many acres as they have this year.
From what we are hearing, and the one I wanted to make you more aware of is Goss’s wilt. From what we have been told this bacterial type disease could become a real game changer for many producers in the immediate future. Reports show that up until 2008 Goss’s wilt had been refined to only parts of Nebraska and Colorado. The disease is now being seen from Colorado to Ohio and looks to be gaining steam. We are hearing that the bacteria has the potential to and is already rotting stalks and cobs in eastern Iowa. Many of the big players are becoming more and more concerned.
Much of the infestation consists of stalk lesions rather than the brilliant colored leaf spotting. The causal bacteria will rot the stalks and possibly cobs. The best thing will be for conditions to turn dry and warm as the stalks and shanks could turn leathery rather than soft and rotten. For this reason a lot of the guys are suggesting that you harvest the corn before it gets below 22% in many areas that may be in danger.
Is "SDS" Disease As Bad As Some Reports Claim?
Just to touch briefly on beans and the SDS problem, yes it is real, and it may actually be a bit worse than we had anticipated. Yields are certain to be affected, and will depend on how many and how early the leaves detach. Keep in mind from what we are hearing on our end, when corn is planted on those fields next year the plants will be prone to a similar style of root infection.
Summary Of The Situation
* In a nutshell we are hearing that a larger amount of the corn is nearing black layer earlier than in years past. Regardless, the plants should continue to stay green until after the black layer forms. This season there are tons of reports showing signs of premature death and wilt. We have heard those that received an application of the Defender G are doing the best and seem to have remained green and healthy.
* Field scouts are reporting that the crop is extremely yellow, much more so than in 1993, when we had much more rain than this year. Keep in mind that yellowing helps cover up some of the disease infestation.
*There is now starting to be a record level of six or eight major root, stalk, and leaf diseases that are affecting or will be affecting grain fill and plant health through the fall.
*Large areas of Goss’s wilt killed plants are getting very easy to spot and the disease is spreading.
*Leaf diseases and Fusarium root rots have affected a huge percentage of the corn.
* Now over half of the acres are being affected by SDS.
How Prices Will Be Influenced In The Weeks Ahead
This should give you a better idea of why we think the Iowa yield numbers will be revised, and why we could ultimately see the entire US number trimmed a little more than we had anticipated.
Keep in mind as we try and predict future price direction that I am not the only one with this information or insight, and in fact I am certain many of the big players have already been long this market for some time on similar information and news. This means this information in some degree is already priced into the market, and could be part of the very reason corn has traded significantly higher the past several sessions.
Having traded professionally for so many years I have learned many valuable lessons in regard to trading strictly off the fundamental news. More times than not they have all been fairly significant financial lessons. Trust me when I say, most fundamental news is already priced into the market by the time you get it in your hands. I simply want you to be aware of what is happening and why so many are concerned about the yields coming in well short of the USDA's latest estimate.
The bottom line, right now in the markets we simply have more traders betting on lower yields. The bookies are trying to adjust the lines as more traders place their bets on lower yields and hence prices are moving higher. Can this price action continue? Will more and more traders continue to place bets on an upcoming corn shortage? Time will certainly tell.
We believe in the coming weeks you will see some players take their bets off the table as farmers move into harvest and operators in some states will be certain to start reporting record yields (this will make some very nervous about their bet). Others may take their bets off the board as they become more nervous about their other bets in the "outside markets" such as in Crude Oil and the US equities (as we get past the traditionally poor October economic data this should change). Once we get through that period traders will have money in hand and will be looking to place new bets on the slightest sign of increased demand or tight ending stocks, this is when I believe you could see a huge run higher. Make certain sure you have some type of re-ownership plan or marketing game plan in place if we start to run, this could be a terrific opportunity for significant profits.
Continue to look for opportunities to get long on profit taking and significant harvest pressure selling. Producers need to adjust hedges accordingly and have a game plane for participating in this market after you have made your cash sales. Give us a call or send us and e-mail if you need help designing a plan of this nature or would like more information about how we can help (816) 322-9800.
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