Corn, especially new-crop continues to be a follower. This is hard for many (including myself) to understand considering it is the corn acres that are most in question??? Reports over the weekend talk about record turnouts in Minnesota for producers considering "preventive plant." Some reports circulating indicate 500 producers at one insurance meeting. There is now talk in the trade that 3-5 million acres of corn might not get planted. Most in the industry seem to believe a delay of one week generally equals about a 1-3% cut in intended corn acres. A two-week delay (past mid-May for most) farmers will generally only plant about 95% of the corn acres they have planned. Simple math then tells us with the USDA currently estimating 97.3 million corn acres, a 3% to 5% reduction would be equal to to around 3 to 5 million acres. In many parts to the corn-belt you may only have another 5-7 day window, while producers in the southern parts of Missouri and down into the Delta seem to have already thrown in the towel on thoughts of getting any additional corn in the ground (most focused now on soybeans).
Corn bulls are also becoming more concerned about "emergence," especially with the forecasters predicting a wetter June. With nitrogen leeching and side-dressing a concern, the high-end of the yields could soon be in jeopardy??? Before you get overly bullish just keep in mind this rally is a "supply" driven rally, which can react much differently than a "demand" driven rally. Simply stated, with prices rallying, it wouldn't surprise me to see the USDA start to back of their demand estimates, even in old-crop. If that were to be the case you might start to see ending stocks swell in old-crop, meaning additional carryover bushels could offset any type of yield loss or production setbacks being forecast in new-crop. Don't forget new-crop demand estimates are also considered very "optimistic" at this point in time and obviously based on LOWER corn prices. I am certainly not a corn bear, in fact I have been "neutral-to-bullish" for a few weeks. Below are a couple of direct statements I recently made regarding "new-crop" corn. Lets not get trapped here, but lets be cognizant of what is taking place.
Tuesday, April 23rd I wrote: "I am starting to think the market could be getting out over the tips of it's skis just a bit. Meaning we could be getting a little ahead of ourselves to the downside in new-crop. Yes, I certainly understand the longer-term "supply and demand" side of the equation, along with the implications associated with a 150-plus yield crop and sub $4.00 corn. The concern however that I currently have is that a large majority of the crop is still sitting in the bag, and there are a ton of weather related "wild-cards" being added to the deck each day. I am certainly NOT saying to lift any hedges or re-own previous cash sales, but investing a little revenue in some type of bullish "short dated option" strategy (just-in-case) might be a smart play."
Thursday, May 9th I wrote: "As for new-crop corn I am actually starting to become a little more "bullish." Certainly not yet to the point of irrational exuberance, but yes I am thinking about sharpening my bull horns. I know a move more towards the bullish side of the fence may sound strange, especially considering all of the bearish rhetoric, but as I talk to more producers I am starting to become more concerned about our overall acreage and "yield potential." Yes, I know its early, and that the USDA generally doesn't give much credence or yield reduction to a late planted crop, but from where I sit today a sub-150 type yield is certainly not out of the question."
Moral of the story, continue to sit tight with 40-50% cash sold. For the first time in months, I elected to reward the recent rally in new-crop (2013) corn with a small 5% cash-sale, with prices just above $5.60 last week. This brought our "cash-sold" position to 45%. With heavy near-term technical resistance at or around the $5.70 area, producers who need to make "catch-up" sales should heavily consider. For me, I am going to hold off and wait to see if new-crop prices can push through the $6.00 level before pulling the trigger on another round of sales. During the next 60-days, from my perspective, anything is possible??? With close to 50% sold, at good profit margins, producers should feel very comfortable being patient right in here and letting things play out a bit. Producers should continue to use the weather rallies to help reduce risk!
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