Thoughts on Last Week's Big Corn Purchase
Apr 30, 2012
Even though I am making sales and reducing risk, I am hoping that the "character" of the market is changing. From where is sit, it looks as if "new crop" corn has played the lead roll the past several weeks, basically ever since the USDA "Ag Outlook" meeting in February and certainly since the USDA "Planting Intention" numbers were first released a couple of months back. My point is "supply" had taken center stage over "demand." Our only hope moving forward right now is that "demand" will once again take over the "lead roll" and pull us higher. We caught our first glimpse of this on Friday as May corn was able to close up over $0.40 cents on the week. I personally think we are going to see some follow through movement higher in the coming sessions as "old crop" supply looks as if it needs to ration more demand. However with new crop prices dangerously close to falling into the "red" we can NOT afford to bet the farm on "wishful thinking."
My belief is that producers HAVE to take advantage of any and all rallies that ensue during the next few weeks. Yes, I understand there is currently no "weather" premium built into the "new crop" prices, and that the early harvested corn in the South could end up going to "exporters" ultimately leaving end-users to the North short supplies. But I also realize there is a strong chance we could end up getting between 96 and 97 million corn acres in the ground, and without a weather problem we could see a yield close to 170 bushel per acre! With prices still at profitable levels and previous sales up above $6.00 there is no reason to get overly aggressive to the bullish side and take unnecessary risk. Yes, there are several variables that could allow us to move higher, but for those with limited "storage" and in need of the "cash-flow," I simply do not like the odds well enough to risk it. My best advice is to pull the trigger on the upcoming rallies and look for ways to reduce more of your downside exposure. There is some talk that May corn may need to push another $0.20 to $0.30 cents higher to ration demand before it goes off the board, hopefully this will help pull new crop prices up a bit form here and give us an opportunity to price a few more bushels.
After the USDA confirmed the largest one day corn sale since 1991, US "new crop" corn managed to close last week up a whopping $0.02 cents. Do you realize just since last week the USDA has reported 690,000 metric tons of "old crop" sales and 2.15 million metric tons of "new crop" sales. As I have been mentioning, the "new crop" corn market just doesn't seem to be digesting the bullish news as one would have anticipated, especially with the cash market continuing to strengthen and the "old crop" ending stocks shrinking on many balance sheets to below 500 million (some even talking 300 million).
Below are the Top-6 "Daily Corn Sales" as reported by the USDA. This dates back to April 14th, 1977 when the ESR first began "Daily Sales" press releases.
#1. 3.72 million metric tons reported sold to the "USSR" on January 9th, 1991
#2. 2.00 million metric tons reported sold to the "USSR" on October 3rd, 1989
#3. 1.86 million metric tons reported sold to "Unknown" on July 6th, 1979
#4. 1.45 million metric tons reported sold to "Unknown" on July 9th, 1979
#5. 1.45 million metric tons reported sold to "China" on December 20th, 1994
#6. 1.44 million metric tons reported sold to "Unknown" on April 27th, 2012
I hate to say this, but I am very concerned about the way this market is reacting to "bullish" news, and I urge you to take notice sooner rather than later. Because of the weak reaction in the Dec contract to the large purchases, I am encouraging producers to quickly get sold to....
We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets. Just click here -