I took a lot of grief early on from several analyst who thought my 155 corn yield number was way too low, now I am hearing talk and numbers being throw around much closer to 152 or maybe even 151. I hate to even throw this on the table, because I don't want you getting "wildly" bullish this early, but I am hearing some very well respected sources starting to throw out sub 150 corn yield numbers.
Personally I am content right now at keeping my number closer to 155, as I suspect the USDA will not make any extreme type adjustments in their next report. It is simply still too early in my opinion to make extreme type cuts, and my best guess is that you will not see the USDA cut any further than 156 or 157 this next go around.
In any regards, the "yields" are certainly starting to be reduced just as I had anticipated, and seem to be the latest topic of discussion. With the yields being challenged, the ending stock numbers are starting to be recalculated as well. Many are now starting to bust out the eraser and pencil in numbers closer to 600 million bushels for corn. I have even heard of a few scenarios being painted that would put us well below 600 million by the time it is all said and done.
The bottom line is this, if weather stays this hot for two more weeks and rainfall is limited, we are looking at yields in the 140's. If this happens, new crop corn will be at $8.00 in a hurry, and beans could be at $15 or even $16 on additional fears. If the "outside" markets can manage to keep the wheels on the wagon we might even be able to add more premium than that.
Don't forget we haven't even started to talk about the potential for an early frost. There are many talking in the Dakota's that the crops might never make it out of the fields. From what I am being told, many believe they are so far behind, that major frost is almost a guarantee, and it will certainly affect the overall yields.
Throw in the fact that several weather forecasters are predicting strong tropical storms late in the summer, and we could see even greater frost-like conditions than we are currently anticipating.
The "Bull's" are out of the gates and definitely running.... Make sure you on board or you stand a strong chance of getting trampled! It is my belief that many of the funds are still on the sideline "licking their wounds" from the last time they tried to make money buying corn above $7.00. Once they are able to confirm this is not another round of smoke and mirrors, I would be inclined to think they jump back on board. We will definitely need their wind behind our sails if we have any hope of reaching $8 or even higher.
The "outsides" have been showing some signs of resilience on the heels of President Obama making an announcement that we are one step closer to solving the US debt ceiling debate. There has also been some very strong US 2nd quarter earnings being reported as of late, with both IBM and Apple blowing earnings estimates out of the water. Most traders still have one eye though on the European debt situation and the question remains, can "all the King's horses and all the King's men...put Euro back together again?" We should know more after this week's European Summit.
I still like making cash sales at these levels and re-owning the board, with a more limited risk type play. The basis is good and this strategy gives you a way to reduce ultimate exposure in these volatile weather markets. Make sure you are considering all of your options and discussing every possibility with your advisor. My thoughts are that any time you can reduce overall risk while keeping your upside potential, it's a win-win!
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