Renewed Optimism for New Crop Corn?

April 28, 2015 01:18 AM
 
Corn Sky Field

While plenty of risks remain for old crop corn, market analysts see a promising trend ahead for new crop corn prices.

“Can we get (corn prices) back to $4.25? Absolutely,” said Chip Nellinger of Blue Reef Agri-Marketing on U.S. Farm Report Saturday, referring to a recent University of Illinois analysis. “It’s a waiting game and a timing issue at this point. It may not be until post-harvest, but I think $4.25 and north of there is in the cards on corn again, even if we go 30 cents lower in the meantime.”

Such comments are a welcome snippet of positive news for farmers, who are dealing with prices in the $3.60s for May and July corn futures—and lots of negative sentiment from hedge funds wary of bumper crops.

“Bountiful harvests mean that investors are staying away, with money managers holding a net-short position in the three crops for eight straight weeks, according to Commodity Futures Trading Commission data. That’s the longest stretch since 2013,” according to a Bloomberg News article on hedge funds and the grain markets.

Nellinger and his fellow panelists—Peter J. Meyer of PIRA Energy Group in New York and Matt Bennett of Bennett Consulting—took a more measured approach.  

“I’m not that super bearish on corn prices,” Meyer said. “In my opinion, if we produce a 170-plus yield—which I think the odds are against—maybe we trade down to $3.25, $3.50 or something like that. But you have to know your carryout is going to be well above 2 billion (bushels) … as far as a downside is concerned, we need to lop off about 500 million (bushels) out of the carryout to get to back to maybe $4.50 or something like that.”

Listen to their discussion on weather, planting, and prices here:

The outlook is not quite so bullish for old crop corn.

“I don’t want guys to think that if we’re going to get a little bit friendly new crop that we think that the old crop’s going to come up,” said Bennett. “I definitely want to encourage guys that, if we do get that rally, to understand that basis is probably going to go away on you. If you get a 40-cent rally, I think you’re going to lose 20 or 25 cents of it on basis alone, because everyone’s going to be trying to sell cash corn at the same time.”

Meyer also stressed the importance of basis in this year’s marketing moves. “Don’t overtrade your position,” he advised. “You guys—know your basis, where it is in your neighborhood. That’s the play. There’s a lot of stuff out there with options and that stuff, [but] if you don’t understand the concept, then I would stay away.”

What's the basis in your area? How are you balancing old crop corn and new crop marketing? Share your opinions with other farmers on the AgWeb discussion boards.

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Comments

 
Spell Check

Niave Ned
Waterloo, IA
4/28/2015 08:13 AM
 

  I realize all the farm websites need to generate cash through advertising, so no one is ever bearish cause farmers wouldn't subscribe, watch, or listening. But for once I like someone to just be real. Risk for us producer has never been the upside. However in current times when margins are thin or non-existant, telling us to wait for a 40 cents rally or more only freezes some producers in making an already tough decision. Heck on market to market their was some yahoo saying Dec corn was corn to $4.70 by the 1st of May. Guess he missed that mark? Guys if these analysis were so smart, they be trading themselves and wouldn't need to be on TV or the internet. It is all a big guessing game and there are too many factors in any given year to even predict price within $.50 on corn. Do your own analysis. Your guess is good as the next guy. Just keep the emotion out of it.

 
 
Victor
NY, NY
4/28/2015 06:00 AM
 

  First of all there is big misunderstand about how market works and price occure. %60 of open interest belongs to hedgers, hedgers saw in thier business risk and they manage that risk on the market speculator is just gamblers thus they are just taking risk of hedgers. SO first you need that hedgers (means farmers and users) must stop to hedge down side to get 450s or whatever. More important point about that article there is huge risk that can kill anybody in financial way is to hope price will move other direction then price is going already. Last 7 trading days we come from 380s to 360s and you are hoping that price will come back. Yes of course it will come back but no one - NOONE can guess it when !!!

 
 
Ned
Attica, IN
4/28/2015 08:24 AM
 

  Are these guys for real? A potential 2 billion bu. carryout and historically high stocks to usage and they think we'll rally .50? Really? China has HUGE stockpiles of corn sitting around, they are propping up prices there to encourage production also. SA weather looks to be near perfect for second crop corn. If we produce trend line yield this year, which won't be a stretch with the cool summer they are forecasting, then there is little chance we rally .50. Come on guys quit telling farmers what you think they want to hear.

 
 

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