The USDA Supply & Demand report came out with a big surprise. Instead of waiting to the end of the month for the actual acreage report, the Supply & Demand report reduced acreage from 92.2 million to 90.7 million. Carryover was reduced down to 695 million. The tone of the market is acres are still too high and yield may be reduced due to the late plantings. Overall, expectations are quite high that demand will have to be rationed.
While this report is excellent for the unpriced producer it’s forcing the market to move into a very dangerous stage of not only rationing demand but destroying demand. How high does the market have to go to effectively slow down usage? Already I’m hearing of talk we could see all time highs in the cash market by the end of the week. If any further supply reduction is seen, the market will have to move to sharply higher levels.
Price action is now exhibiting a price pattern similar to all historical blow off tops like 1988,1996 and 2008. Before the high is made price expectation explode to become almost unrealistic. I would not be surprised to start hearing about $9 to $10 cash corn. As a producer, the question you must ask is how many end users do you know who will be willing to lock themselves up at such a price? Everybody will go hand to mouth or look for alternatives or simply stop consuming. So the next 30 to 45 days could be very difficult for the seller but that what makes it so good for the long term.
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