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Weekly Corn Review

The CBOT is moving to longer hours for its futures contracts, but the focus of the corn trade remains far from Chicago. Basis in the cash is red hot as the rationing of old crop supplies plays out in the cash market.

To be sure, July futures got a nice pop in the last week, courtesy of a wheat market that's also on fire. But producers with old crop to sell should be tracking their local cash price carefully. Signs of basis weakening are a warning your local market may be ready to make the transition from old crop to new, a process that won't be pretty.

Realistically, this is probably weeks, if not a month or two away, unless July futures take off. While there's certainly room for July to match or even exceed the fireworks from the May contract, my guess is $7 cash corn would be enough to open, if not clear, plenty of bins. For the record, July has resistance next around $6.58 to $6.62, with the May expiration high around $6.85 the next target. My model still holds out hope for a top of the selling range above $7, but mathematics likely can't predict the emotions of end users scrambling for coverage.

New crop futures are another story altogether. While just a couple weeks ago it appeared soybeans might lure acres from corn, the decline in the soybean to corn ratio, coupled with good weather for planting, likely means growers will put in close to their intentions from March. USDA releases its first crop ratings of the season Monday afternoon, which should show the crop off to a good start, projecting yields even better than the 166 bpa USDA put in its May 10 projections. That could keep the market on the defensive into early June, at the least.

The December chart has upside targets at $5.50 to $5.60 that could get hit if the wheat rally continues. That's close enough to the crop insurance guarantee to work, so make sure to have at least uninsured bushels covered. Locking in up to 40% to 50% will improve income if prices fall into harvest under the weight of a big crop, allowing hedges to be rolled to capture basis appreciation. Spending a nickel to cover sales with deep out of the money calls provides extra upside protection in case the market takes off.

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 Advisor. 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 basis, energy, fertilizer and financial markets and 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.