From the Editor
Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.
Are the bears running out of ammo?
Nov 15, 2013
Hello Pro Farmer Members!
Whew... I'm glad we got that out of the way!
The last two Fridays have been very important for corn market bears. The bears fired about every round they've got in the magazine at the corn market with a big increase to the national average corn yield from USDA's NASS last Friday and a cut to the implied corn-based ethanol use mandate today.
What have you got left?
That's what I thought... not much.
I'm not saying corn prices have posted a harvest low and are now set to rise through the winter months. But I am saying corn market bears are just about out of ammo. The market had to wait while about three-quarters of the 2013 corn crop was harvested between crop estimates from NASS, all the while listening to talk of "bigger-than-expected" corn yields.
Then during the government shutdown, a draft proposal from EPA was leaked. In it was a proposal that the 2014 corn-based ethanol use mandate would be cut about 1.4 billion gallons from RFS levels to about 13 billion gallons. And that's what EPA delivered today.
I guess maybe the next round might be that PEDV with threaten to dramatically reduce corn-for-feed use.
Okay... I'm joking around a bit here and not nearly as "frustrated" as that might sound. But the reality of the situation is that corn market bears have fired about everything they can at the market. Today's EPA RFS proposal will probably be enough to force December futures back down to test the Nov. 8 low at $4.15 1/2. And that low should be tested before it's confirmed as "the" harvest low. After markets have trended in the same direction for a long period of time, it is unusual for a low (or a high) to be posted with a "spike," which is what the Nov. 8 low looks like on the daily chart. To confirm the low, it will need to be tested at least once and probably several times.
And... unfortunately, that can take weeks... even months.
We didn't get a chance to cover this in this week's Pro Farmer, but Informa Economic, Inc., reportedly projected a 2014 corn crop of about 13.7 billion bushels this morning. That's if the consulting firm's 2014 corn plantings projection of 91.5 million acres is right. That's a cut in corn acres from 95.3 million planted in 2013. Or, a more accurate way to look at it might be that it's a cut from intentions to plant 97.3 million acres to corn in 2013.
In other words, the corn market built up supplies and, if Informa is right, is already responding to market incentives (or disincentives) to constrain supplies in the year ahead. Again... if Informa is right, that new supply probably wouldn't add much to 2014-15 corn carryover, suggesting a stabilization of the market.
That's it for now...
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