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.