Should We be More Worried About December 2014 Corn Prices?
Jul 16, 2013
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In recent weeks the USDA has given us bearish numbers in the form of huge planted acreage and some of the biggest ending stocks for corn that we have seen in a long time. This has put a significant amount of pressure on the December 2013 corn contract. The outlook for less then ideal weather in some areas during key moisture sensitive growth stages has kept December 2013 corn from a free fall, but what about December 2014?
At this point it seems that there will be a big corn crop this year. At this point the question is how big. We currently believe the USDA is overstating production but also overstating demand. In the end we feel that we may have already seen the biggest ending stocks numbers that the USDA will put out, but maybe not by a whole lot. We do feel that yield numbers and harvested acreage numbers need to come down but much of this will be offset by lower feed, ethanol and export numbers unless lower prices can stimulate some demand. So all of this paints a bearish picture for the December 2013 corn contract. But, with crop insurance levels being set at higher prices last February some of this blow will be cushioned. Furthermore, there has been a lot of investment in storage in the last few years and producers may choose to store and hold grain until prices go back up.
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In this scenario producers may be able to keep prices elevated for some time due to a tight cash market. So between higher crop insurance prices and the potential for producers to hold corn out of the market December 2013 prices may not be headed as low as some people are forecasting. The bigger problem could be the next growing season. If prices are much lower in February crop insurance will not offer the same protection as it has in the last few years. And, if producers are storing grain waiting for higher prices then what happens if we have another big crop next year. December 2014 corn may be the contract that actually takes the beating.
We should at least be looking at what we can do with next year. I am not suggesting flat price hedging. I would not want to forward contract or lock in prices here with a whole other growing season to go. I do like the idea of putting some parameters around the market. We have some option strategies we are using to get this done for corn, wheat and soybeans. Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.
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December Corn Daily chart:
November Soybeans Daily chart:
December Wheat Daily chart:
All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have corn near $5.50 and soybeans near $13.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
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