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Head to Head: A Plan for Low Prices

July 31, 2013
 
 

Q: 

Producers have been hearing for months about how low prices can go in light of record-planted corn and soybean acres. As we continue to remove some of the uncertainty with these crops, what would be your downside objectives for both December corn and November soybeans?

A:

Scenario Planning Paints Picture

Naomi Blohm, Senior Market Advisor, Stewart-Peterson

naomi blohm

For December corn, if $5 support is taken out, the next short-term objective is $4.50. This could happen by mid-August with good weather. There is substantial support at $4.50, as it’s the long-term uptrend for the continuous weekly December corn chart. With current acreage estimates, yields of 160 bu. per acre and $4.50 support breaks, the next technical low is $4 at harvest.

If USDA accounts for prevent-plant acres and reduces corn acreage and if yield is average or better, then $4.50 will likely be the low for December futures, with prices between $4.50 and $5.50 into year end.

Unlike corn, soybean fundamentals have a negative slant because of ample global supplies. The first support on November beans is $12, which will likely be hit by mid-August with good weather. If $12 fails, then the next target lower is $11.25 to $11, which is where the uptrend holds for the continuous weekly, November chart. If corn breaks below its long term up-trend price of $4.50, then soybeans will likely break below $11, leaving $10 as the harvest target.

If USDA accounts for prevent-plant acres, $11 November futures should hold, allowing prices to bounce between $11 and $12.50 for November futures towards year end.


A:

Implement Discipline When Marketing

Brian Bastings, Commodity Research Analyst, Advance Trading

brian basting

If there is one thing certain, it’s that there will be surprises this fall, which will ultimately affect corn and soybean price direction.

These could range from a surge in Chinese purchases to unprecedented export competition from South America to economic developments that directly affect the purchasing power of overseas buyers.

These types of events can send prices much lower, or higher, than we had anticipated. In this environment, our guiding principle is there always has been, and will be, uncertainty in price prediction.

However, this uncertainty can be turned into opportunity by implementing disciplined management strategies.

Current fundamentals indicate a significant downside price potential for corn and soybeans. With respect to corn, a record harvest and weak export demand could see December futures trade to $3.50 to $4. A bumper soybean crop and stronger export competition from South America could send November soybean futures to $9.50 to $10.

It’s likely both lows would be seen at harvest. Again, amid the uncertainty in commodity price trends, successful marketing is tied directly to implementation of risk management strategies.

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FEATURED IN: Top Producer - Summer 2013

 
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