Corn Prices to Sink Lower: Analysts

September 15, 2016 03:52 PM
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Farmers who are waiting to sell their corn and hoping for a recovery before all of  this year’s bumper crop is harvested are likely to be disappointed, according to analysts.

Corn futures, which last week traded in Chicago at the lowest levels since 2009, according to Bloomberg, are likely to continue their downward slide while storage space fills up, they say. And wheat prices, which are at 40-year lows, are also pushing down corn, say analysts.

Farmers need to brace themselves for making a few pennies, rather than 10 to 20  cents on corn futures trading, cautions Kevin McNew of Grain Hedge, in Bozeman, Mont.

While he predicts that corn prices will continue to grind lower as they seek a bottom, farmers  also will see basis start to tumble, he says.

“The overarching theme it that it’s not the market of the last 10 years (when corn prices rose sharply), it’s a game of small moves,” McNew says.

Although corn has support from ethanol demand, South America weather woes, and more even price competition with Ukraine corn, it isn’t enough to keep prices from sliding further, he says.

U.S. corn exports fell 2.8% in August, while all agricultural exports dropped 3.4%, according to a report released Wednesday by the U.S. Labor Department. Soybeans and other oilseed exports also dropped 8.8%, while wheat exports slid 1.6%.

In early trading Thursday, December corn slipped four cents to $3.27 ¾, while November soybeans rose 7 cents to $9.49 ¾.

But that wasn't much of a surprise for Duwayne Bosse, of Bolt Marketing, in Britton, S.D.

“The seasonal tendency is for corn prices to go down for the next two weeks,” he says. “The funds are still short this market. They’ve already sold it, so how aggressive do they want to be at $3.35 corn?”

Another seasonal factor to watch are large yields because they could allow for a test of the $3.01 September contract low set several weeks ago, says Mike North, of Commodity Risk Management Group in Platteville, Wis.

So what should farmers do?

“We’re telling them to store the corn and maybe even pay for commercial storage, and wait (for a better price),” says Bosse, who adds he doesn’t think supply will outstrip storage.

Farmers will get the corn stores in bins or bags or piles at the elevator, says Bosse

Buying puts is another option, notes North.

“Farmers who have been making sales of late to clear bin space can buy calls in the March timeframe to re-own those bushels sold at less-than-exciting levels” he says.

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