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Current Marketing Thoughts

RSS By: Kevin Van Trump,

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

How low will corn go???

Oct 03, 2013

 Corn price have somewhat stabilized around the $4.40 area in the DEC13 contract after losing more than $1.30 per bushel since mid-June. 

Producers continue to ask how much lower can we go? My thoughts are there could eventually be another $0.60 to $0.70 cents of downside, meaning a $3.70 to $3.80 price tag could eventually be placed on new-crop corn. Remember, just as the funds tend to overdue things to the upside the same can be true to the downside. 

A better question might be when will the lows occur? From where I sit today, the lows might not occur until 2014. My thoughts are the overall corn yield will grow to some degree, but not as much as some are projecting. I doubt a 160-plus yield number is in the cards (maybe but I doubt it). Keep in mind there was a ton of corn planted in late-May and early-June that still needs to be harvested. The big "corn-on-corn" producers who didn't get much rain during Jun/Jul/Aug are simply NOT going to be harvesting big yields on these acres. Keep in mind we are still yet to see are 1-2 million reduction in "harvested acres." Basically meaning while the crop may still be getting bigger, I am not sold on the fact it is going to grow significantly. This means the trade could pressure prices a little lower near-term on thoughts of a bigger US crop, but probably NOT significantly lower.  My guess is that we start to find more stable ground down around the $4.10 to $4.20 area. From here I think the sell paper dries up to some extent as the "risk-to-reward" ratio for the big players becomes less-attractive. Point being there won't necessarily be new longs jumping in the corn market but rather more shorts banking profits and exiting. 

At the same time I am thinking US producers who have made limited sales will be apprehensive to move cash bushels at this low-end of the range, also preferring to wait until 2014 for tax purposes. That may give the market a little bullish bounce as the bears stop to catch their breath and the trade could perhaps be digesting some type of South American weather headline. I think the trade will want to see how the South American weather plays out before they hammer the bottom out of this thing.

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