What is the deal with CORN?
Apr 23, 2013
Considering the ongoing rain and cooler than normal temps, Corn producers are stumped by the recent price slide. The trade however seems to be looking past the current US weather concerns, and is banking on the US producer’s ability to get the crop in the ground.
In typical fashion, I am starting to think the market could be getting out over the tips of its skis just a bit. Meaning we could be getting a little ahead of ourselves to the downside in new-crop.
Yes, I certainly understand the longer-term "supply and demand" side of the equation, along with the implications associated with a 150-plus yield crop and sub $4.00 corn. The concern however that I currently have is that a large majority of the crop is still sitting in the bag, and there are a ton of weather related "wild-cards" being added to the deck each day.
Producers however should be careful getting all bulled up simply on the planting delays. Keep in mind back in 2009 we were only 5% planted at this juncture and ended up with the highest ever national yield of 164.7 bushels per acre.
A yield anywhere near that this time around would produce a crop of more than 14.5 billion bushels and an extremely burdensome carryout closer to 3.0 billion bushels. You don't need me to tell you where corn prices will be in this scenario...sub-$4 is almost a guarantee.
In 2009, with just over a 13 billion bushel crop, prices in September fell to below $3.00 per bushel. On another note Brazil is set to increase the ethanol blend in fuel from 20% to 25% from May 1st, and has announced tax cuts on the biofuel to help boost production.
Maybe this will help keep a few more corn bushels inside the Brazilian borders.
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