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Current Marketing Thoughts

RSS By: Kevin Van Trump, AgWeb.com

Kevin Van Trump has over 20 years of experience in the grain and livestock industry.

Will Bullish Headlines Persist in the Corn Market?

Jan 13, 2014

Corn Data Surprises The Trade… Total Production Number, Yield, Ending Stocks and Quarterly Stocks ALL lower than the trade was anticipating.  Would I call it a game changer? No. From my perspective it was NOT a hard overhand right but rather a clean left jab by the bulls. It will be interesting now to see how the funds respond to the shift in data. Is it longer-term bullish? I don't believe so. I just look at it as being a little "less bearish" than before.  In fact some arguments are already being made that if corn prices stay supported into planting the data will only encourage more corn acres at planting and ultimately be even more negative to price down the road. My fear is we just won't be able to find the bullish headlines needed in order to keep the big bulls fed longer-term. Not only are we burdened with trying to find a way to replace the Chinese export "cancelations," but also keep in mind the USDA just raised their Chinese corn crop estimate from 211 to 217 MMTs and lowered their Chinese corn import estimate from 7 MMTs down to 5 MMTs (not what we needed). Corn used for ethanol production was raised to levels that are justified (5.0 billion) but now (in my opinion) give us very little room for additional upside growth. The feed and residual numbers scan be highly debated.  Bottom-line, I believe it's going to be much tougher than many are thinking to build any type of sustained bullish campaign without a MAJOR weather story of some sort in 2014. With that being the case I see no alternative but to keep our current hedges in place, hope that the market can continue to work itself a little higher (DEC14 north of $4.75) so we can reduce even more of our downside exposure.  As for old-crop bushels I continue to urge producers to lock in their basis as I am afraid a flat price rally accompanied by heavy producer selling could cause the bids to drop.  Remember, as Gavin Mcguire at Rueters pointed out, "The on-farm corn stocks might have gotten all the attention, but the off-farm total is the highest since pre-1980." Spec shorts should remain patient and let the market digest the changes. I would NOT be adding to short positions on the rally at this point. I believe there is still some work to be done to the upside, especially considering the nearby shift in the "technicals." Click here for my daily report...

Additional Thoughts From USDA Report: Below are few additional thoughts that are circulating based on the recent USDA data.  

 

  • Lower Yield: Most were obviously thinking the yield was going to move higher, not lower.  The 158.8 yield was due to lower than expected yields  from areas of IA, MN and SD.  There were also a few ares in the western corn-belt that yielded numbers less than anticipated. Despite the USDA raising harvested acres by 436,000 total corn production fell by about 64 million bushels. 
  • Quarterly Stocks: Another big surprise was "Quarterly Stocks" which came in 300 to 500 million bushels BELOW what many had anticipated.  Keep in mind this is still some 2.4 billion bushels above a year ago. Obviously the smaller than expected crop is partly to blame, Click here for all my comments...
  • South American Production: The USDA elected to lower Argentine corn production from 26 MMTs down to 25 MMTs. In the same stroke they elected to leave Brazil's production "unchanged" at 70 MMTs. Form my perspective there are still some problem areas in southwest Argentina (hot and dry) and various areas across the country that simply did not get planted. Therefore I am thinking Argentine corn production could ultimately work its way lower by another 1-2 MMTs, especially considering the heat and and dry conditions some areas in Argentina are experiencing during the critical corn pollination period.  On the flip side however.... Click here for my daily report...   
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