Ramp up the Corn Rationing

August 27, 2011 12:23 AM
Ramp up the Corn Rationing

With a dwindling outlook for the nation's corn crop, prices are anticipated to go higher. Look for new highs and resistance point to develop. 



With already-high prices and short supplies in a market where demand continues to keep pace, the market may be heading for new highs, says Jerry Gulke, president of the Gulke Group.

Following the announcement of Pro Farmer’s 2011 Crop Estimates for corn and soybeans, Gulke says the markets will only get more wild from here on out.

"It presents a problem in what we call price rationing. We need to ration a couple more million bushels in demand now over and above what the government already said we needed to do."

This story isn’t over yet, either. Pro Farmer shook the market after Friday’s close by announcing a potential corn yield of 147.9 bu./acre, and a soybean yield of 41.8 bu./acre.

Perhaps the most alarming thing about these numbers is that this is not the final word, says Gulke. "These crops have a tendency to get less and less yield wise. They haven’t released. USDA hasn’t really covered the prevent planting or idled acres yet and we probably won’t see that until October."

Looking at the spreads between the Dec. ’11 contract and the Jul. ’12 contract shows that the market is looking to curb demand significantly. The Dec contract is currently trading 17 cents under July, but is $1.02/bu. over the Dec. 12 contract.

Click here for the Corn Spread Matrix chart.

"We have a 40 cent limit on Monday now, and we could put some price pressure on end users real quickly. They were starting at $7.00 just the other day it seems like. And now they’re looking at $8.00 all the way to July. We’re going to have to cut demand out here, and I think that’s already in the process. It just means we’re going to have to do more.   



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