Corn Selling Opportunity in next Two Months

Published on: 03:06AM May 05, 2017
Corn
 
 
 

Short-term planting issues are unlikely to have a long-term impact on corn prices. For one, there’s plenty corn left over from 2016, and two, there’s still plenty of time to plant. Short-term issues mean short-term opportunities. It’s likely the next two months will be the best opportunity to sell corn.

It’s wet in Western Kentucky-- too wet. We also have a river at flood levels, which delays not all, but many acres. Although Kentucky is a small player in the grand scheme of corn acreage, other producers across the Midwest are having extreme weather too. Planting progress is quick when the conditions are warm and dry, but the corn crop is not starting on a high note.  

Acre reductions were already expected for 2017-- 94 million in 2016 to 90 million in 2017. Continued wet weather could reduce it more. Crop progress is a little behind 2016, but in line with average. More importantly it’s difficult to estimate the quality of those acres. For example, you can be 100% planted, yet need to replant many acres and have damage.

A seed salesman recently noted our excellent yields after later-than-desired planting in 2014. My area planted a significant number of acres in mid to late May in which resulted in record yields. I hope that will be the case again, but statistically a later crop isn’t better. Normally, we would want to be done with corn planting by the first week of May. I appreciate his optimism-- even if he just wanted to push corn!  

Carryover is a part of the price puzzle. If we assume the normal trendline yield, corn carryover is still close to two billion bushels. Basically, there shouldn’t be a shortage even with fewer acres. It will take a significant hit to the yield and acres to reduce this. It's too early to count on either.

In a recent Brock Report article, a study of corn seasonality suggested it’s probable the cash market made a low in September with a potential high to come in June. When I say high in June, that’s not likely to be a significant rally, but even 25 cents would be a great reward for patience.

It’s difficult to sell aggressively before the crop is planted when using cash contracts. That’s not bad, but you must remember opportunities are presented when production is questionable- sometimes too questionable to be overly aggressive. Producers that aren’t willing or able to use futures contracts to be flexibly aggressive are favoring options strategies more than ever. Financial stress and tight cash flow is creating a creative mix of tools in 2017.

The best opportunities present themselves when there’s uncertainty. Once you’re 100% sure what you have, it’s too late. Everyone else will have a good idea too. Be ready to react in the next two months. 

Email Katie at [email protected]

 

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