Grain Price Rallies Still Possible

April 10, 2013 02:06 AM
Grain Price Rallies Still Possible

While old-crop corn prices are highly unlikely to charge back to winter highs, a springtime rally could still be in the cards from present levels for those holding on. "Look for some price recovery," says Greg Wagner, president, GWX Ag Advisors. Moreover, he looks for at least some price uptick from the possibility of both improved ethanol profitability and a stronger export picture moving forward. "This could give a lift to corn," he says.

In part, that’s due to lower prices of the past month stimulating buyers to book. In addition, basis could strengthen during planting season, Wagner says. Short term recovery is also possible in the soybean market.

On new crop, consider making sales on rallies to $5.50 to $5.60/bu. range, says Jerry Gidel, chief feed grain analyst, Rice Dairy. That’s 10 to 20 cents higher than yesterday’s December futures close of $5.40. Gidel suggests making some new crop sales over the next two to three months, at least. "A lot of people have $4 in front of (new crop prices for fall)," he notes.

Gidel is not expecting trend yields of 160 bushels corn for 2013 corn, given the lack of subsoil moisture still present in the Western Corn Belt. But even a recovery from 120 in 2012 to 150 bushels this year is probable, he says. That would generate production of 13 billion bushels, and that, in turn, a 2 billion bushel carryover given how much demand rationing has occurred worldwide, Gidel states. "That’s where the danger lies for U.S. corn producers."

In 2013, the market will be far more sensitive to weather predictions than it was last year, says Gidel. "Last year, the market got complacent," he says. In particular, the market will be sensitive to moisture forecasts for western Iowa, the Dakotas, Kansas and the eastern part of Nebraska where many acres are under dryland cultivation and which are still short of adequate subsoil moisture, Gidel adds. "Markets this year are going to be more sensitive to rain."

On the downside, with market price losses to both corn and soybeans in recent weeks, "a lot of speculative money has moved to equities," he notes.

Despite subsoil problems in some key corn growing areas and the possibility of planting delays, "I’m optimistic for an adequate recharge of soils and for the crop to get planted on a timely fashion," Wagner says. He notes that last year, for instance, 25% of the U.S. corn crop was planted in just one week, that of April 29, and 64% of the crop was planted during a three-week period, from April 29 to May 13. Wagner also notes that in many years following a severe drought, production has mounted a major recovery.

Both Gidel and Wagner made their comments yesterday on a CME Group webcast ahead of today’s monthly crop production and World Agricultural Supply and Demand Estimate (WASDE) reports.

Read AgWeb's Pre-Report Analysis of April 10 Reports


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