Don’t panic. Plenty of time exists to still sell old crop corn and soybeans. "We are only halfway through the marketing year," notes Frayne Olson, ag economist at North Dakota State University.
Moreover, given the rapid ratcheting down in prices in recent weeks, particularly for old crop corn, the odds favor higher prices from present levels rather than lower ones, he says. "There is still hope for a price rally." While the paring back of demand has been necessary given the reduction in supplies of last year’s crop, "maybe the market has overcompensated," he says. Old crop pricing opportunities? Now through planting for sure, Olson says.
"As I look into the crystal ball, I see other opportunities this year to price old crop. A 50 cent retracement from where we are right now to $6.75 is still very doable." Furthermore, he looks for lower corn prices to stimulate more usage. For instance, feedlots that had switched to feeding wheat from corn are now more likely to switch back. Exports, too, have the potential to bounce back somewhat, and he suggests keeping an eye on USDA’s weekly export reports.
While fundamentals favor a spring rally, it’s not a given, however, because of the possibility of bearish macro events: "Uncertainty about North Korea, uncertainty about the U.S. and international economy, and continuing uncertainty about Europe." A bump for soybeans and wheat is not as likely as that for old crop corn, however, because those two crops did not see the same price reduction in response to USDA’s Grain Stocks report of a month ago, he says.
On new crop corn, any delays in planting could send prices higher. Already, he says that in the northern outreaches of the Corn Belt that still have snow on the ground, there is talk of switching to shorter season varieties. That would reduce yield potential, he adds.
Furthermore, dissecting the Prospective Plantings report shows that corn acreage is held the same or actually reduced in states in the heart of the Corn Belt, with the increases coming in northern regions with less yield potential, such as North Dakota. All acres are not the same, with the yield potential in North Dakota not near that of Iowa, Olson notes. The market has not yet focused on this, he adds. "No way has the 2013 crop been made."
For old crop soybeans, Olson says a short-term market pop during planting due largely to logistical issues is quite possible. "Watch local basis," he advises. Olson sees a trading range developing between $13.40 and $14.60, with prices right now on the low end of that. "A 50-cent recovery in soybean prices would represent a good short-term pricing opportunity."
On new crop, Olson says that if anything, soybean acreage expectations were on the high end of the range in the Prospective Plantings report. As a result, some new crop pricing opportunities could present themselves.
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