Corn and soybean prices dropped today retracing much of yesterday’s gains. The Farm Bill was rejected today in the house. Stock market indices were down substantially from yesterday’s FOMC minutes. Weather looks dry for most of the Midwest and overall the forecast is not a concern of ours at this time.
Yesterday the Federal Reserve released their FOMC minutes which led the outside markets to a large late day selloff. I believe this is what kick-started the selloff in commodities overnight and was exacerbated during today’s session as the Dow Jones fell another 350 points! The immediate response of the market has been to sell riskier assets and capitulate into "safer" assets like the Dollar. High priced treasuries are selling off in expectation of rising interest rates which is almost a self-fulfilling prophecy. Gold was down over$90 while crude oil was down over $3.50.
Meanwhile the House of Representatives rejected the Farm Bill today which came as a surprise to the market. I can’t exactly say whether this is bullish or bearish for prices as we have to wait to see what other legislation gets introduced.
Yesterday’s surge in prices was not linked to any specific news story and now we have already started show signs of reversing. Producers who have sold early over the past couple of years are reluctant to continue pricing corn/beans especially when different sections of the country have had poor weather to start the growing year. Of course we can’t predict the weather in July and August but that will ultimately be the main deciding factor. However… we can agree that A LOT of weather premium is likely worked into the market prices. The assumption that weather problems ARE going to return is also holding back hedgers from making those lofty sales. If we get past the June 28th report without any bullish surprises and the crop continues to progress (barring any real weather problems), we should see the market start take out premium from heavier producer selling. In the mean time, can we go higher? Sure. But we have to remember the last time funds bought into these levels was right before the March 28th report which resulted in a double lock limit down move after stocks were reported 400 million bushels more than expected. Are the funds ready to buy at new highs into next Friday’s report again? If your crop is looking good and you haven’t sold or protected all of your guaranteed bushels, it may be a good time to look at protecting more of your downside price risk. Please call us to go over your available marketing options.
Informa is estimating corn acreage at 95.262 million and soybean acres at 77.756 million. These are not significantly high or low in our opinion. The weekly ethanol report showed production down and stocks up. Weekly exports were also mediocre. Now that the outside markets are seeing some significant downside swings we have to be aware of how they will affect grains. In 2008 the market crash ultimately pulled people away from commodities and helped bring corn from $7.99 down to $2.90 over the course of 6 months! For now we want to stay with the recommended hedges. For an overall evaluation of your current marketing plan please contact EHedger at 866-433-4371. Have a great weekend!