Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.
Old Crop Corn Up Again Overnight
Jan 25, 2012
· Grains higher again overnight; Market clearly concerned that old crop corn supplies are not adequate; N/Z spread up again, March corn nearing key fibnonacci level near 6.37
· Soybeans up reluctantly in sympathy with corn, no fresh news to report however some rumors were floating around regarding Chinese purchases early this week
· Interior cash market for corn on fire, CIF +10 yesterday
· Weather in South American not really the hot topic it was a couple weeks ago; Traders now more focused on ’12 acreage allocation and old crop grain supplies
· Outside markets mostly negative for grains today with US$ higher, crude/equities both lower; Grain clearly showing independent strength
· Farmer selling still being described as "light" despite recent flat price rally and red hot basis levels
· Export Sales out tomorrow at 7:30am CST
We’re really at a key point in the grain markets right now. The market is trying desperately to figure out whether or not the USDA is correct in their assessment of the 2011 corn crop. If the government’s production number is too high, even by 1-2bpa, the upside in both flat price and old vs. new crop spreads could be explosive. Crop insurance indemnities hit a record in 2011, paying out over $9 billion, clearly indicating that the crop was poor. On the flip side, a market that believes the USDA and their current data likely means we’re smack dab in the middle of a fantastic selling opportunity. July/Dec corn is trading over 80+ on the overnight trade. Many now believe that it has the potential to move well past the $1.00 mark, some looking for an even more substantial move. The hope here for producers is that old crop contracts drag new crop contracts back to a level seen as attractive. We think soybeans hold up, simply because they won’t get enough acreage to move substantially lower. As far as the market is concerned, wheat is corn, and should be treated as such until further notice. Opening calls are higher, bears beware.
As always, call the office with questions or concerns.