In this file:
· Corn Prices to Hit Near-Record Lows, Time to Trim Soybean Acres
· Bearish Argument for Corn
Corn Prices to Hit Near-Record Lows, Time to Trim Soybean Acres
By Sonja Begemann, Farm Journal, Seeds and Crop Production Editor
via AgWeb - May 10, 2019
Today’s World Agricultural Supply and Demand Estimates (WASDE) report from USDA sent shockwaves through the market. With corn prices seeping lower, traders and farmers alike are reeling from the numbers.
“New crop corn carryout was way over the highest expectation,” said Chip Nellinger, Blue Reef Agri-Marketing, to U.S. Farm Report Host Tyne Morgan. “The 176 bu. per acre yield—I’m betting the under on that.”
The 2019-20 corn crop is projected to reach 15.0 billion bu., up from last year and the second largest on record. Total corn supplies are forecasted at 17.2 billion bu. with the season-average farm price at $3.30 per bu. This is down 20 cents and the lowest since 2006-07 marketing year.
“The one thing that I think the market is missing is they’re assuming with this five, six-day weather window that we’re just going to slam a lot of seed in the ground,” Nellinger said. “And that’s not the case.”
After polling its Midwest customers this past week, even farmers in the driest areas need until Tuesday or Wednesday of next week to finish up planting corn, he added. Some of those farmers expected it could take up to Friday—when it’s going to start raining again.
“We’re not going to get nearly as much planted this coming week as what the market expects,” Nellinger said. “Don’t panic into a sale at or near the lows that you know, with one Tweet, you can regret.”
Speaking of Tweets, President Trump enacted $325 billion additional tariffs on Chinese goods at 12:01 a.m. Friday, May 10. The ongoing trade war has wreaked havoc on farm country—namely soybean prices.
We need to cut 10 million-plus soybean acres to get back to higher prices, said Arlan Suderman, with INTL FCStone. “And that’s likely not going to happen.”
The 10 million acres is needed if farmers maintain the high yields experienced in the past few years, Suderman noted. Weather concerns, delayed planting and any potential production issues could change that number.
However, Suderman said the markets aren’t giving enough credit to African swine flu (ASF) and its erosion on soybean demand.
“USDA has failed to tell the accurate story of ASF and what’s it doing to demand destruction on soybeans over the last six months,” Suderman said. “It has not given farmers the information they needed to anticipate what was going to happen.”
While ASF has decimated soybean demand, Suderman and Nellinger both feel optimism for corn demand, including Chinese demand...
Bearish Argument for Corn
By Bryan Doherty, Successful Farming
Agriculture.com - 5/11/2019
Last week we talked about the bullish argument for corn. Knowing the market can go either way, this week we're looking at the opposite side: the bearish argument.
Corn futures have been in a sideways-to-lower price trend since fall. Managed money has been aggressively short, and has set a record pace for selling into the late April and early May window. All of the uncertainty with growing a crop lies ahead, yet managed money stays short. It may be as simple as three words: supply, supply, supply. Despite weather scares and a poor start to planting, the reliability of crop production in recent years seems to be the dominant factor in holding prices down.
While the U.S. dollar, trade, and competing commodities all have an impact on price direction, nothing compares to the most important factor: weather in the Northern Hemisphere. This region grows 75% of the world's corn crop. If this year's weather is conducive for the planting season and the growing season, there is little reason for a price rally. The March 29 Stocks and Acreage reports were both negative, with corn acres expected to increase 3.6 million more than a year ago.
The market has a tendency to focus on the net supply of corn at the end of the marketing year, which ends August 31. This is called ending stocks. Currently, this is projected at just over 2 billion bushels. By all accounts, this is termed adequate. By adding 3.6 million acres, private forecasters suggest ending stocks could increase close to 2.2 billion for the year ahead. These figures will likely keep speculators on the sidelines and end users buying only as needed.
When carryout is as large as it currently is, usually managed money will stay defensive, remaining net short. As long as there is the perception that the upcoming crop yield will be at trendline or higher, funds are likely to keep their short positions. There is a carry charge (cost of storage) in futures. As long as cash prices remain steady or lower, managed money will likely stay put, selling the carry and anticipating back-month futures to eventually drop to the cash price.
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