USDA provided even more bearish news that I expected Nov. 9, but the market’s reaction provides hope for light at the end of the tunnel.
By spiking to new contract lows, then holding, December futures supported ideas that a cycle low is in. Corn typically trades in eight to 12 week cycles and last week was 10 weeks off the Aug. 31 spike low. Whether the low holds likely depends on the mood of big speculators. If they decide to take profits on their big bearish bets, short covering at a minimum could create at least a little momentum for a rebound.
Of course, those hedge fund managers could also double down and pressure the market lower, because projected ending stocks are still expected to rise to nearly 2.5 billion bushels in the year ahead. Moreover, USDA’s increase in its estimate of 2017 yields and production may not be the last increase. History suggests at least a decent chance that the crop could get even bigger.
That’s one reason why only modest expectations should be in order. Seasonal trends with years with good crops don’t offer much hope of an extended rebound. And cycles don’t have to be five weeks up and five down. A week or two could be it.
One limiting factor could be lack of news. USDA doesn’t update production estimates again until January, and the market should start moving into holiday mode soon. Exports appear to be picking up and demand from ethanol plants also looks encouraging. But feed usage levels won’t be known until Dec. 1 stocks come out Jan. 12.
Farmers likely will lock the crop up in storage, which should encourage some end-user buying on the board as they boost basis bids to shake some bushels loose.
Questions too could arise about what’s happening in South America. Somewhat delayed planting of soybeans in Brazil could cut corn acreage and push the growing season in other fields further into the driest part of the yield. But actual results are a long ways off, which could keep buyers sitting on their hands.
With cash corn trading around $3.10, the market is clearly unprofitable. But growers who made some sales at higher levels this summer may not be far from making money, especially if their yields are as good as USDA forecasts. December-July carry is still trading near 30 cents, a great incentive to roll hedges forward and add new ones on modest rallies. December futures have $3.53 as its first tough test. That’s just a dime higher, but it might be enough to sell and turn the corner to 2018.
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Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on corn farming, basis, energy, fertilizer and financial markets feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
For more corn news, corn crop scouting information and corn diseases to watch for, follow Tom Bechman's column, Corn Illustrated Weekly, published every Tuesday.