WASDE Exports: $4.50 Corn “Realistic” If Stars Align

February 8, 2018 01:47 PM
On Thursday, the USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) report, showing corn is seeing increased exports and reduced stocks.

On Thursday, the USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) report, showing corn is seeing increased exports and reduced stocks. Exports have been increased to 125 million bushels, and stocks have been lowered 125 million bushels from the January report.

On the other hand, soybean exports aren’t experiencing the same strength as cor. It’s been no secret that exports have been sluggish. Exports for the 2017-18 marketing year are down 60 million bushels to 2,100 million.

“It’s bad news, but all things considered, the market has held together pretty well,” said Joe Vaclavik, president of Standard Grain, during a Facebook live.

There’s been rumors that the soybean crop in South America is strong in Brazil. Andy Shissler of S&W Trading says the USDA is looking at the weather situation in dry Argentina.

“If they don’t get rain in Argentina, you’re looking at a 7 to 10 million metric ton drop in production,” he said. “It could be even more than that. This next rain event, [it] need[s] to happen or it will be market changing on price.”

According to Kirk Hinz, meteorologist at BAMWX.com, this dry weather pattern could hang around until mid-February, or the rest of the month.

“Things will get worse before they get better,” he said on AgriTalk.

If this dry weather stays in Argentina, Shissler thinks the U.S. will see “a more dynamic market.”

“It could add a buck in beans,” he said. “With our weather here—it could be even more than that.”

While this price sounds better, there’s still a question of acreage. Some analysts believe soybean acres will top corn at upwards of 91.5 to 92 million acres. Vaclavik thinks with the price of December corn, the acreage mix will be 50/50 this year.

“I don’t see a big acreage rotation much different than last year—I don’t think there’s the incentive for either crop,” he said.

Corn exports in the WASDE report were especially impressive for Vaclavik. He said if this trend continues, farmers could see stronger corn prices, upwards of $4.

“You can figure the rest out, but you can’t make a market rally,” said Shissler.

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Spell Check

Greensburg, IN
2/8/2018 06:16 PM

  Love the good cop bad cop routine, which sums up our market to a T. Today's Corn at 2.3 billion carryout could move to 2.1 billion carryout with a little better demand infusion which could open the door for a weather market reaction during the summer. Dry spring mean crop gets planted timely which would be bearish initially not bullish. Which brings summer weather as the key component in how far we take Dec corn. Waiting on $4.50 corn is obsurbed to make sales. Scale up will be my approach. Buying calls are that cost .02 cents might net you a nickel. Useless unless all out drought hits. If you buy calls, now is the time, but make sure you have some skin in the game ($4.20 strike??). At least there is corn goes to $4.50 you can double, maybe triple your money if volatility goes crazy. Old corn has too much of a weight around its neck. Highest March corn got last year $3.80 in mid Feb (July got $3.94 on the July rally last year). That appears to be the wall again this year. With the yields most folks got this year, don't calculate price alone. It is the revenue that needs to be watch (yield X price). Beans carryout scares me (530 mil) and there is room for further downward adjustments coming (exports down 200 million bushels vs last year). We are having a trade war with China, and Brazil is kicking our butts. Hearing more acres around here on beans. Cheaper to plant, and banker's purse strings are getting tighter & tighter. I agree sell beans (and/or buy puts) in the $10.00 to $10.40 range. Again if your worried about weather go buy a call to protect sales. Unfortunately the cost of bean calls are never cheap even .60 cents out of the money calls ($10.60 strike) are .35 cents. But again you probably need to make that decision now and not when Nov beans are at $10.60. Horse will be out of the barn by then. I do agree things appear to be changing, but we are probably in the early stages on the next bull market (Dollar breaking/Equities falling, etc)


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