Corn Could Use a Report Surprise

June 29, 2010 12:41 PM

Many corn growers are attempting to move stored supplies on fears of lower prices, plus the need to get bins emptied. As a result, "Gains in old-crop corn basis should be hard to come by in the near-term," says J. C. Hoyt of Cash Grain Bids. "Through most of the country, basis levels are mostly unchanged as ample stocks at elevators and on farms keep end-users satisfied. At the Gulf, spot basis levels climbed by 7¢/bu. over the last week, carrying upstream river terminal basis up more modestly."

USDA's Grain Stocks report Wednesday, June 30, will shed additional light on how much and where stocks are being held. "This report represents half the crop-year's usage," says Jerry Gulke of the Gulke Group. "It sometimes delivers surprises." 


Overall, Gulke has a bearish slant: We may very well take corn back to $3 if there isn’t some type of macro type of market influence, such as:

1.       Major weather event affecting a large part of the South or part of the Midwest (time is running out);
2.       An obvious deterioration of the crop in China, EU or Central Europe (still possible);
     Lower acreage shock in the June 30 planting intentions report (market expects more acres for both corn and beans)
4.       EPA raising ethanol to 15% (delayed at least until fall);
5.       A major disruption in oil supply (hasn't happened in 9 years, and economies are slow) 

All of the above seem possible, but the market apparently is seeing corn yield prospects increasing faster than any of these items can affect," says Gulke. "Soybeans are barely hanging on with a greater chance of crop deterioration."

Bottom line: If the market gets surprised enough tomorrow to bounce, you may want to catch it on at least a portion of your crops.

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