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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