Chip Nellinger: There Will Be At Least One Perceived Threat to Production

Chip Nellinger says, “Producers should be prepared to be more aggressive than years past in protecting downside price risk.”

By AgWeb Editors

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January 19, 2024 08:55 AM

From Chip Nellinger, owner, Blue Reef Agri-Marketing

It is difficult to be extremely bullish on corn, but with prices sitting at multiyear lows just under $4.60 on March futures and right at $4.92 on December futures, it is hard to believe there won’t be at least one perceived threat to production in the coming months to give us a bounce to much better levels than what are currently offered. Before even talking about production prospects in the U.S. this coming spring and summer, it appears the corn market is giving virtually zero thought to the upcoming Brazilian safrinha corn crop. After a historic drought in Brazil earlier this year, the market seems to think everything is magically better now that there have been a few rains across the country. In reality, much uncertainty remains as to both the economics of planting corn in Brazil as well as whether the drought conditions have truly been broken or just delayed. Also, a lot of unknowns exist about the upcoming U.S. growing season, where many areas of the western Corn Belt remain with extremely dry conditions. Rallies should be achievable, but producers should be prepared to be more aggressive than years past in protecting downside price risk.

Soybeans are sitting at multimonth lows having just dropped $1.60 off November highs. There appears to be no attention given to the 700+ million-bushel variance in recent private estimates of the Brazilian crop size. With recent rains across many of the dry areas there, the market seems to have waived the “all clear, crop is saved” flag. This might be a wildly premature assumption. The soybean market has a recent history of multiple $1.50 to $2+ swings both ways. Prices are currently undervalued and rallies back to $13.20 on old crop contracts and $12.70 on November beans, at minimum, are realistic.