March corn and March soybeans both hit new contract lows on Friday still searching for bottoms.
Tommy Grisafi, Advance Trading, says the selling pressure was largely a result of farmer selling going into the end of the month as March options expired on Friday, plus first notice day for March contracts comes up next week.
“Puts were worth an incredible amount of money, the calls pretty much expired worthless. I mean we went through $4 on corn today. It was a blood bath. With the basis contracts farmers underestimated the potential for the market to go lower. The last time we had carryout this big we had $3.50 corn.
The basis tells the truth and there is too much corn in America and too many people that held on to corn and beans because the biofuels industry needs them,” he adds.
So, will the farmer selling dry up next week or will the funds take their foot off the accelerator? Grisafi says, “If the funds are still adding to their short position this could get really ugly.”
The stock market and S and P 500 are making new highs, while the corn market is making new three-year lows and he says that is not a good sign. “Remember for funds the trend is your friend and there is plenty of money around if the funds want to continue to add to their short position,” he adds.
Grisafi doesn’t see anything right now that can change the market trend, except some unforeseen event or a big production problem with the U.S. crop during the planting or growing season.
The same selloff happened in the grains when the December options expired, and the December contracts went into delivery. Unfortunately corn and soybean prices are lower now than they were then and farmers are losing money when they roll to a deferred contract like the May because of the carry in the markets.
Grisafi says, “As you roll you know every month in the futures is higher than the next so its expensive to do that. We’ve dealt with inverses the last few years, before the Ukraine war, during the Ukraine war especially during that.”
