New Corn Trigger-Pulling Strategy

June 23, 2014 07:00 AM
New Corn Trigger-Pulling Strategy

Ahead of USDA’s June 30 quarterly stocks and acreage reports, it’s possible corn prices will rise, says Chip Nellinger, Blue Reef Agri-Marketing, Inc. Nonetheless, producers should bank on a new era of selling strategy and plan accordingly.

"I think you could see some short covering, probably not a 40-cent bounce coming, but you could easily bounce corn 15 to 20 more cents kind of up into that $4.60ish zone on December," Nellinger tells the U.S. Farm Report Market Roundtable. "But it’s probably not high enough from a producer standpoint psychologically. We want $5 for it. I’m not sure if we’re going to get it. So we have to adjust our thinking a little bit. If you have huge yields or better-than-average yields, you can afford to sell at a little bit lower price, but you have to pull the trigger still."

Unprecedented high yields will affect hedging strategy, adds Tommy Grisafi, Advance Trading.

Power Hour Noon Logo"I talked to growers this week that thought they were 25% hedged, and if they have a record yield they might be closer to 18% hedged," Grisafi explains. "So my question is, you should be hedging to what you’re comfortable with, but a third of what? That’s the big question. I think the bushels are going to be there."

Although preliminary conditions suggest a strong corn harvest this fall, it’s likely that conditions will moderate over the coming weeks. It’s true that flooding has taken place in states such as Minnesota, but best-ever conditions have been seen in big parts of Iowa, Illinois and even Kentucky.

"We’re probably holding that production back a little bit where they had so much rain, but other areas, all the yield potential is there," Nellinger says. "It’s still early on, but crop conditions are going to stabilize here, and I think that’s the risk. It’s hard to get much better than where we’ve been, we could see it ratchet back a couple or three percentage points in the next couple of weeks."

Remember that limited reports of severe weather and crop damage often get amplified via Twitter and other social media. That means comparisons to 1993—when heavy rains contributed to broken levies—might be premature.

"I like talking to the old-timers, they’re the ones who remember everything, and they say it’s not bad or of that level," Grisafi says. "But if we come into Monday and these areas that were supposed to be dry over the weekend receive another big shot of rain up where Chip was talking about (in Minnesota), I agree with him, we might start to see crop conditions decline."

Click the play button below to watch the complete U.S. Farm Report Market Roundtable--including discussion of the soybean and wheat markets and a recent Federal Reserve announcement--beginning at the 7:20-minute mark:

Click here for more news and videos from Top Producer’s Power Hour.

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