Expect Market to Soften as Crop Conditions Improve

June 10, 2011 10:00 AM

This information is provided by Archer Financial Services, Inc. 800-933-3996.

The USDA Monthly Supply was the headline grabbing information this week in a week that saw corn values begin with a $.25 decline from last week only to end the week $.33 above last week’s close in July Corn. 

What appeared to be a very mildly bullish report was met with limit gains on Thursday as the trade was surprised that the USDA chose its June S&D Report to make some most necessary changes. Anyone that is remotely acquainted with the grain markets and has only slightly followed Midwest weather conditions, has expected a downward adjustment in the planted acreage figures for corn. The only surprise was that the adjustment was made on June 9 and not June 30.

There may yet be another 500,000 acres shaved off of that figure in 2 ½ weeks. The real surprise may have been in the long overdue adjustment made in the world balance sheet as global corn carryover stocks declined by 17 MMT. Even this has been discussed in the marketplace and by national grain associations for the better part of 8 months. It appeared that the market was expecting a benign report and when surprise adjustments were made the reaction was an overreaction. 

The late-week rally provided a great opportunity for producers to hedge some new crop corn production above $7. As crop conditions improve, look for the market to soften and work back towards the middle of its recent trading range in preparation for what will most certainly be a critical and large price moving report in 20 days. Whether we are able to exceed this week’s highs and by how much will not be based on any information that we received this week, but by the data received in the June 30 Stocks and Acreage Report and how the weather plays out the rest of the summer. Make sure you are prepared for the volatility.




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