Could Corn Be Overpriced?

July 6, 2016 12:30 PM

As growers know, corn has slid in recent weeks. After December corn topped out at $4.49 in June, the market was at $3.51 on Wednesday morning, according to Joe Vaclavik of Standard Grain. All eyes are on carryout, and the balance sheet doesn’t look pretty, Vaclavik says.

“Most of the balance sheet work points to new crop ending stocks in the 2.2 billion to 2.3 billion bushel range if you’re to assume a trendline yield,” Vaclavik says. “That’s bad, bad news.”

Last year, the market was looking at a 1.8 billion bushel carryout and traded a range from $3.60 to $3.90 for several months, according to Vaclavik. “We’re looking at a much, much bigger carryout this year,” he says. “You could make the argument that at $3.50, we are still overpriced.”

Here are three factors that he sees driving corn prices lower:

1. Brexit: Britain's decision to exit the European Union is having a lingering impact on grains, according to Vaclavik, because of the resulting strength in the U..S. dollar. 

2. Weather: Corn is entering the critical pollination stage. Too much heat and not enough rain could have dramatic impacts on yield, so analysts and farmers alike are watching the weather.

3. Fund positions: The funds are still long corn and probably still long beans, according to Vaclavik. He also says that the market is seeing some obvious liquidation, which is also playing a big role.

Listen to Vaclavik’s Wednesday morning commentary here.


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Spell Check

Mark C. Daggy
Humboldt, IA
7/9/2016 02:26 PM

  In June, I received no less than 4 to 6 calls per week pressuring me to sell some of the 205,000 bushels I have stored in 5 different elevators. The grain buyers encouraged me to sell the corn at or around $4/bushel and buy it back long on the board. With corn collapsing almost $1/bushel, I would have lost $1/bushel or essentially sold it for $3/bushel. I would like to know whether the Coops and grain users bought short and picked up that $1/bushel. I have followed my fathers advice, if they want the corn, buy it for my price or feed your hogs, chicken and/or turkeys hay.

Ben Hyde
Peterson, IA
7/7/2016 11:30 AM

  Just got back from our honeymoon in colorado few weeks ago, seen several piles of corn still outside in nebraska. The piles i had seen were definitely heating up so at least some of it is gonna be not good. Does anyone ever factor that in?

Tommy Hardy
Farmville, NC
7/6/2016 10:36 PM

  Sold at 4.10....if you're making $$ and be it.Our yields aren't as high as you guys,we're not as fortunate with the rains but our inputs are the same,I think..We can't see the light at $4.00 corn