USDA Report Analysis: Sell Corn Now; Buy Back Later?

11:08AM Oct 08, 2010

With corn locked limit up, likely for the day, there’s nothing a farmer can do, says Jerry Gulke of the Gulke Group. The bottom line for today on his farm: A serious look at selling off the combine and possibly reowning the crop by some mechanism later. "There’s the old saying a short crop has a long tail. We need to take prices high quickly to shut down demand then they’ll tail off as corn becomes too expensive to feed or import or convert to ethanol with oil prices at the levels they are." In fact, Gulke thinks this report may be the nail in the coffin of EPA’s moving the mandate to 15%. 

"There are many ramifications," he says. "As I wrote in the just-issued October Top Producer, this feels very similar to 2007-08—maybe even more bullish now. I fear we’ll again see elevators stop forward contracting or do so only in nearby months, and widen basis to help cover their potential margin calls. Today, there are a lot of end users in a world of hurt on hedges against contracted grain. Third party risk is way up again."
 
On the positive side, he says, "I think this market will give us opportunities for $5-plus corn again in 2011, with production costs pretty comparable to this year."
 

LISTEN TO GULKE'S AUDIO ANALYSIS.