From The Editor
September 28, 2012
Hello Pro Farmer Members!
We made an aggressive move for corn hedgers this week by advising you to get to 100% sold on expected 2012 corn production. We also advised cash-only corn marketers to get to 75% sold.
When we made the advice, corn futures were breaking below support on the charts and everybody seemed to be talking about "bigger-than-expected" corn yields. Then USDA delivered "September surprise" (in reverse) and we had another limit-move price reaction to the September Quarterly Grain Stocks Report.
So... what now? Hold off on making those cash sales? Not a chance. There still isn't enough economic incentive in the market to put corn in the bin. Toss in the risk of loading a bin full of aflatoxin and this is one of those years to sell the corn.
And if you've locked in prices on all your 2012-crop corn, don't panic. If we see followthrough buying, we've got plenty of time to reown a portion of sales in either long futures or call options to ride a post-harvest rally.
Looking forward, today's smaller-than-expected Sept. 1 corn stocks estimate of 988 million bu. does change the attitude of the market... including the 2012-crop contracts. That's because one year's carryover is the next year's beginning stocks. So USDA could make no changes to the 2012 crop estimates in the Oct. 11 Crop Production Report and total corn supplies in the Supply & Demand Report will be down 193 million bu. from the September S&D Report. So... the supply-side cushion for the 2012-13 marketing year is a bit thinner.
At harvested acres of 87.361 million (from the Sept. Crop Production Report), losing 193 million bu. from 2012-13 beginning stocks is no different than losing 2.2 bu. per acre from the national average yield estimate. The end result will very likely be a 2012-13 corn carryover projection down around pipeline levels -- something around 650 million bushels. And the only way that can happen is if estimated use is cut... again.
So the Quarterly Grain Stocks did change the market... both fundamentally and psychologically. Hedgers should be ready to reown a portion of 2012-crop cash sales.
That's it for now...
Have a safe harvest!
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