Corn Meal Update:
We believe Corn prices will continue
to be high for the future. December crop report lost more bushels , corn crop
was even shorter than expected. Usage remains high with ethanol still making
good margins because of high oil prices. Corn if as short as predicted will
leave the industry short before they get into new crop corn. If new crop is not
large and they have short crop prices will remain high next year. Put that
together with the the Fuel prices that have been going up have caused quotes to
We are however hopeful that high corn will bring rationing sooner or later and prices will fall. This will have to come from end livestock users or processors. These things are also not good because less of something will make prices higher in grocery stores for consumers.
Below please find a market brief
(from early Tuesday morning, August 05). This brief
is much self explanatory, basically stating all commodities are falling,
following the lead from crude oil. The primary reason for crude oil's price decline
is two-fold; declining demand and slight strengthening to the U.S. dollar.
This brief also states two conflicting reports re; size of this year's U.S.
corn and harvest expectation. The brief states that one commodity trading
company (= F.C. Stone) is expecting U.S. corn harvest at 154.5 bu. per acre,
which would produce a 12.2 Bbl bu. harvest. That is a huge change upward in
recent weeks. However the brief also gives a conflicting view from another
commodity trading company (= Storm Exchange) which is expecting a U.S. corn
harvest at 143 bu. per acre. This yield would only produce a 11.2 Bbl bu.
harvest. That is a wide difference from Stone's projections.
Grain and soybean futures should continue trading sharply lower under
pressure from a continued wave of commodity fund long liquidation spurred by declining
crude oil futures and a stronger dollar. Fund liquidation should remain the
No. 1 factor affecting most commodity markets. Continued favorable corn and
soybean crop conditions will remain a bearish to the market.
While favorable growing weather and crop ratings are certainly having a
negative affect on corn and soybean prices, the over-riding factor
determining market direction at the time is the flow of investment money,
which is leaving commodities. Fears that record crude oil prices have
created a world economic slowdown have burst the crude oil market bubble for
now. Falling crude oil prices are forcing index funds to liquidate positions
in other commodity markets to keep their portfolios balanced. Crude oil
futures traded today below $120 per barrel for the first time since
early May. This action will likely keep pressure on the index funds to
continue liquidating positions. Also, investors are beginning to withdraw monies
from these funds. A strengthening dollar is also working to lower commodity prices,
as it eases inflation concerns. At the same time, with the dominant price
trend now being downward, traditional trend-following funds are also exiting
long positions in corn and soybeans and beginning to make short positions.
Fundamental pressure on corn futures will come from broker F.C. Stone's
estimate of a 154.5 bu. per acre U.S. corn yield and 12.197 bil. bu. crop.
However, the New York-based weather risk management firm,
The Storm Exchange, has a much different view of the crop, pegging
the avg. U.S. yield at only 143 bu. In the USDA's July report projected a
yield of 148.4 bu. The market seems to be paying little attention to
Storm's estimate. F.C. Stone pegged the U.S. soybean yield at 41.5 bu., slightly
below USDA's July projection of 41.6 bu., but the further improvement
in USDA's soybean crop rating to 63% good/excellent should help keep
prices under pressure. The market knows well that the next month+ will
be the critical time for soybean yields. Talk of slowing Chinese demand
will also remain a bearish market factor for beans.
Wheat futures figure to remain caught in the undertow of the funds'
liquidation, coming under influential pressure from further price weakness in corn,
soybean and crude oil. Chicago futures have fallen to their lowest levels since late
May. European wheat futures have fallen to 8-mo. lows. Large world supplies of
wheat are also keeping pressure on the wheat market price, although demand remains
strong. Estimates of crop production and exports continue to rise for Black-Sea area
countries. Ukraine now sees its total 2008-09 grain exports hitting 17 MMT
up from a previous estimate of 15 MMT. Bulgaria has harvested a bumper wheat
Over the past couple of weeks the
corn market broke from its historic highs. The corn market's high was in late
June, climbing near $8.00/bu. Since that time it has fallen almost $2.00/bu (=
$4.00/cwt.). Corn values are now back to areas of early Spring. Corn's
historical high values came on the tails of crude oil's major jump. Crude oil
has fallen almost 15% from it's early Summer highs. Plus the dollar seems to
have finally found a bottom, and has since strengthened.
Growing conditions for corn this summer have been good, so far, however we are a long way from being able to count on a bumper harvest. We must remember the corn and soy crops got off to delayed starts. Most growing areas are still 2-4 weeks behind "normal" schedule. Some flooded areas were never able to have a crop planted.
Next major weather scare would be a very cool August / September, or an early October frost. Many in the commercial grain trade believe the price pendulum has swung down too quickly, and therefore the markets are in for another price upswing. However, most all traders think the previous historic highs will not be seen again anytime soon. The Index Funds have sold some of their HUGE "long" positions in the market, which helped prices fall quickly. Some corn usage (feed, export, ethanol) has been filtered out of the market.
Corn futures have broken out to
double-digit gains and new all-time highs after opening moderately stronger.
Overnight rains in the central US Corn Belt AND forecasts for more rainfall late
in the coming weekend
precipitated this buying spree. The renewed strength comes despite poor weekly
export sales of only 15.8 mil. bu. against expectations for 20-29.5 mil. bu.
Soybean futures are now being tugged upward by the strong corn market, after chopping around on both sides of unchanged in light early trade, as pressure from poor weekly export sales offset support from the restart of
the Argentine farmers strike. Weekly soybean export sales totaled 10.3 mil. bu. in line with expectations for 5.5-13 mil., but only 1.5 mil. bu. in sales were for the current marketing year.
Wheat futures have shown surprising strength in relatively light trading volume, finding strong support from corn futures moving to new highs and from new strength in rice futures. There is some talk of a new freeze
threat to the HRW wheat crop, as well, but that does not appear to be a major market factor. Weekly export sales have been supportive as they came in near the high end of trade expectations.
A close by corn futures at new all-time highs heading into tomorrow's USDA reports would look very bullish. Dec. corn futures now appear clear to head for at least the top of their long-term trading channel, which is now
above $6.60. As we have noted before, the objective suggested by the recent bull flag is above $7.00 per bu. Although we expect most corn acreage to be planted despite delays and high prices may result in more acres, the late
start for the crop is likely to keep the market very nervous about supplies with a high yield desperately needed this year. USDA confirmation tomorrow of trade expectations for a much tighter 2008/2009-supply/demand situation
may further bolster the bull market. However, slowing export sales raise new questions about the strength of the demand side of the market. Traders will continue to watch ethanol's political situation closely.
While much of this morning's strength in wheat futures appears to be due to the corn and rice markets, weekly export sales were encouraging with USDA reporting sales of 11.5 mil. bu. of wheat for 2008-09, pushing total
advance sales for the upcoming marketing year to 145 mil. bu., which is an unheard of level for next-year sales. By comparison, a year ago at this time advance sales for 2007-08 were at about 37 mil. bu. Chicago July wheat futures have pushed out above Tuesday's spike high, trading at their highest level in 12 sessions. A close above last week's
high of $8.43 heading into the key USDA crop report would look very bullish from a technical standpoint and would probably trigger a further rally back to at least the $7.90-$8.00 range. While the avg. of trade estimates is for
USDA to report at 12.7% increase in winter wheat production, it's a bit difficult to know what to expect from USDA with slow crop development making it more difficult to forecast production potential. There does not appear to
be anything to the latest talk about a freeze threat. Weather forecasters don't see conditions becoming cold enough, long enough to threaten the crop.
Now, a Commodities Conundrum
By Steven Pearlstein
Wednesday, April 30, 2008
The global financial system these days is beginning to look like a giant Whac-a-Mole game -- when we think we've knocked down one speculative bubble, another one just like it pops up.
The latest is the commodities bubble -- everything from oil and natural gas to gold, copper, wheat and rice. As with the credit bubble before it, the explosion in commodities prices has its origins in a global savings glut and massive trade imbalances. Like the credit bubble, this speculative bubble in commodities has badly distorted the workings of key markets and sectors of the global economy. And as with the other, this bubble is creating vast new wealth for some, including brokers, traders and investment houses who have gorged on fees and trading profits.
The difference this time, however, is that even before it bursts, this bubble is causing economic discomfort for households and businesses around the world, and misery for hundreds of millions of hungry people who suddenly cannot afford a bowl of rice or scrap of meat. The Post's eye-opening series this week on the global food crisis has provided a grim reminder that the global economic ecosystem has become so interdependent that a drought in Australia, a tax credit in the United States, French farm subsidies and export controls in India can wind up forcing a desperate African farmer to eat his seed corn.
Although commodity prices are notoriously volatile, the price increases in the past year are off the chart: rice up 122 percent; wheat, 95 percent; soybeans, 83 percent; crude oil, 82 percent; corn, 66 percent; gold, 37 percent.
Behind each of these increases is a particular story of supply that has been constrained or demand unleashed. To varying degrees, all of them reflect the fact that the global economy has just gone through one of its strongest growth periods in a generation, one that has lifted hundreds of millions of people out of poverty and made middle-class consumers out of hundreds of millions more in places like China, India and Brazil. Given those realities -- and the long lead time required to clear farmland, drill oil wells and open new mines to meet the surging demand -- a bull market in commodities was almost inevitable.
But what turned a bull market into a bubble was the sudden arrival of large numbers of new investors and an array of new investment vehicles, many of them involving derivative instruments traded outside the confines of regulated markets.
Speculators have always played a prominent role in commodities markets, but in the past year, they have literally overwhelmed them, causing a dramatic increase in trading volume, volatility and prices and disrupting many of the normal relationships between producers and end-users.
Many of these were the same hedge funds and hot-money investors who had gorged on sovereign debt of developing countries, tech and telecom stocks, subprime mortgages and commercial real estate and now needed a new thing to focus on. Others -- including, it is said, some sovereign wealth funds -- looked to commodities as a hedge against the falling dollar. But perhaps the biggest push came from pension funds, foundations and university endowments whose managers had all gone to the same conferences and read the same academic papers, suggesting that a basket of commodity futures would provide a good hedge against stock and bond market declines.
To meet the needs of these investors, Wall Street and Chicago's commodities houses came up with all sorts of new vehicles, including exchange traded funds, index funds and structured investment vehicles -- the commodities equivalent of mortgage pools and asset-backed securities.
There are various estimates of how much of this new investment money flowed into these vehicles in the past two years. Philip Verleger, an economist who closely studies commodity markets, estimates that the inflow was running at an average of $100 million a day during most of 2006 and 2007, rising to as much as $1 billion a day during the frenzied trading days of February and March. J.P. Morgan put the amount at between $150 billion and $270 billion. And the Bank for International Settlements estimates that the value of all the derivative contracts traded on the unregulated over-the-counter markets surged from about $3 trillion in the spring of 2005 to more than $8 trillion today.
Whatever the number, it's hard to imagine that it wasn't a significant factor in skyrocking prices that have created problems for many of the nonfinancial players who rely on the commodity futures markets for selling products, assuring adequate supplies and hedging against price fluctuations. Many farmers and grain elevators are reluctant to sell their product on futures markets out of fear they won't have the cash to meet the ever-escalating margin calls, while giant users like Cargill are reportedly also cutting back on the their use of futures contracts to lock in supplies.
On many commodities markets these days, the cash or spot market are often below that of futures market -- a condition known as "contango" that usually signals that something other than market fundamentals are at play.
Perhaps the best proof of all that there's a speculative bubble in commodities that may be about to burst: ConAgra, the 147 year-old food professor, last month sold its commodity trading division to a hedge fund for $2.1 billion. Cash.
Indeed, the only people who don't believe speculation is driving a commodities bubble are the big commodity traders and the commodities exchanges, which are profiting handsomely from the soaring prices and trading volumes, and the regulators at the Commodities Futures Trading Commission, whose economists cannot seem to find statistical evidence that financial investors have had much of an impact on commodity prices.
To its credit, the commission last week decided to hold off on plans to raise the limits on how much any one fund can speculate on any commodity. Ostensibly this is out of concern, in the words of the acting chairman, "that additional speculative pressures not exacerbate the anomalies we are experiencing in these markets."
I suspect what's really going on is that the industry, which has always called the tune at the CFTC, fears a backlash in Congress that could usher in an era of tough new regulation of commodities trading as part of a broader package of financial regulatory reforms.
End January 2008
In the past couple of weeks the corn
market continued its strong and steady march higher and as a result we are
nearing historically high price levels.
Since early January the corn market has traded up about $0.30/bu. (= $0.70/cwt.). The corn markets (as well as other grain markets) were given a major boost to the Bullish sentiment from the most recent USDA Supply / Demand report - which basically stated the usage of corn is growing faster than supply; much faster!
A few months back there were many analysts who felt the corn market was over-priced. Since then, the market has risen dramatically in the past few months, some of those analysts have now switched to believing this Major Bull market is likely to continue; at least until spring time.
It is the opinion of those at Iowa Corn that the market is too top-heavy, and is due for a major correction. However that may not happen until closer to spring when market gets a more clearer picture of what grains are being sown on what amount of Midwest acres.
The Spec. Funds remain "net longs", keeping prices elevated. One would think those positions will be sold-off for profit at some point in time. Demand for corn inventory remains very strong; feed useage, ethanol, exports etc.
Since this fall's harvest ended the
price value for corn and soy (and wheat and oats) have risen dramatically. Since
harvest the market price for corn has risen over $1.00/bu. (equates to a rise of
OVER $2.75/cwt. for Corn Meal products). That is a HUGE increase; and even
though the market is technically over-bought it shows no signs of weakening. All
the seed grains and soy seem to need higher price valuations to claim planted
acres for this year's crop. And both the corn and soy markets are being pushed
by crude oil, as products for each grain can be used to make vegetable oils
needed for Bio-Diesel.
The Higher the value for Crude Oil, then the Higher value for Bio-Diesel (and the more valuable vegetable oils become). At some point prices will peak; but the big question remains WHEN?? If crude oil values continue to hold around $100/bbl., then look for the commodity markets to stay strong.
There are some analyst beginning to whisper words for corn values to extend to (and go beyond) $5.00/bu. If that happens that could add another $0.60 - $0.85 per cwt. to the values for Corn Meal products.
Fundamentally there is more than enough corn Supply for this year; but the market is trying to compute expected demand over the next couple of years (because of Ethanol) and is trying to begin price rationing today.
The reality is we can all look for our grocery bills to continue climbing much Higher; bread, meat, dairy, poultry, eggs, cereals, etc..
During the past three to four weeks
the corn market has increased strongly and steadily. Since our last update the
corn market has traded up about $0.40/bu.
(= $0.90/cwt.). Besides the value for corn increasing, the cost of transportation is again increasing because of petroleum price increases.
This recent jump in market price came about because of two primary reasons;
1) Traders are beginning to believe Supply will not be as big as earlier forecasted.
2) A weak U.S. dollar promoting strong export demand of all commodities.
Iowa believes that traders have the market now over-valued.
The most recent USDA Supply / Demand information indicates tightening year end inventories;
Which is Bullish to the market. Perhaps that factor is now already priced into the market value.
The Spec. Funds are again "net longs", meaning the have pushed the price up. There will come a time when those funds will want to take their paper profits, and those actions could start a price drop. Most though, would not expect a major drop in price.
Demand for corn inventory remains very strong; feed usage, ethanol, and exports continue to drive that demand.
In the past few weeks the corn
market has fallen dramatically. The market traders are of the belief that a
major corn harvest will be upon us this fall. The traders feel this summer’s
weather has been more than giving to the growing conditions of the crop. The
favorable growing conditions coupled with large amount of acreage planted equals
a record harvest.
There are pockets of the Midwest where the weather was far less than ideal for growing crops. It remains to be known how much further the traders will lower market prices until harvest begins. The difficulty in the wheat market is another factor that will underpin market price for corn. Wheat values will act as a buoy for the corn values.
The market trade will likely remain flat until harvest time (late September/mid October).
The next major news comes this week with a U.S.D.A.’s crop update and Supply/Demand report. Demand for corn inventory remains very strong, primarily because of usage for ethanol. However export demand has slowed compared to last year because of high prices, and high ocean freights. The best thing about this year’s corn crop is that a minimum it will be an “above average” harvest.
End June 2007
In the past week, the corn market
has had another major appreciation. This appreciation is due to the path taken
by wheat and the market is sensing the wheat crop to be in a little difficulty.
Too much rain in the OK, TX, and southern KS wheat area has affected harvest, yield and quality. The Spec. Funds bought wheat, and then corn that pushed values up quickly.
The corn market will soon be the lead trader of the commodities and in the next month will either make or break this year’s crop.
Weather in the Midwest corn growing area will be a major focus, more this year than any other year in the past. The Midwest needs to grow a huge bumper corn crop. To achieve this bumper crop, corn plants will need perfect growing conditions. Anything but perfect growing weather (i.e. draught scare) will ignite prices to move higher and quickly.
Parts of the Midwest are already searching for rain clouds (mostly the eastern corn belt).
Spring was OK, but not ideal. Probability for perfect summer weather is not very good.
In the past couple of weeks the corn
market increased by about $0.22 per cwt. It has had a few days of sell-off, but
not much it has been mostly an upward trend. The Spec. Funds started again
pushing this market.
From a Fundamental look (supply-vs-Demand) the market is a little over-priced, but the market is presently trading more on emotion than on fundamental news, and emotionally the market is undervalued.
This year’s remaining inventory stocks are dwindling as expected, primarily because of corn usage for ethanol.
So far spring weather in the Midwest has been good to okay, but not ideal/perfect for crop growing conditions. A little too wet in some locations and yet a little too dry in other locations. Weather in the Midwest is a prime concern, this year more than any year past.
The market still needs U.S. farmers to grow a HUGE BUMPER crop, and weather conditions need to be perfect for this to happen. The market is just now beginning to trade on weather forecast/predictions. This is about a month earlier than normal years of trading summer weather predications. As stated earlier the market is probably now overpriced, but if any draught occurs this summer in the Midwest, then today’s values will seem extremely cheap.
We will continue to keep you advised.
Mid May 2007
The corn market is now trying to
find its mark. It will sell-off one day, and then buy back the next, and so on.
The Speculators are pushing and pulling the market.
Weather in the Midwest is a prime concern, this year more than any year in the past. With inventory stock expected to dwindle because of corn usage for ethanol the Midwest needs to grow a bumper crop PLUS!
To date the Spring has not been ideal. Many areas of the Midwest still too wet to plant seed, while other areas of the Midwest have concerns of needing Spring Rains.
More to follow as things develop.
The market is trying to maintain its
present sell-off. This sell-off began a few weeks back from a government report
indicating that more than expected acres of corn will be planted this Spring.
This was the Farmers’ response to high prices.
Now the market is in a spring weather loop. Market has fallen because of farmers planting intentions; but the Market also understands adverse spring weather could affect those intentions. So far the Spring weather has not been ideally great for corn seedlings, but its still very early in the planting’s stage. The countryside needs ideal Spring weather to quell market fears, but so far this spring it has been wet and cold. As a result the day-to-day market will trade along with weather forecast and predictions. Once the seedlings get into the ground and begin to grow, then the market will hopefully relax.
The next potential for major movements will be late Spring/early Summer. Weather predictions and adequate moisture will be extremely critical this summer. This will not be a good summer for a draught.
Well, it is starting to sound like a
broken record; "the market moved higher - again". Market prices have risen by
almost $0.20/bu. (= $0.40/cwt.) in the past couple of weeks. The market is not
moving upward by leaps, but rather moving up methodically. But nonetheless, it
keeps moving up.
There really does not seem to be any news to counter this movement. The market place is demanding corn, and allot of it! There is a tremendous amount of usage for corn; both present and expected. Present corn demand for Ethanol is greater than expected. Corn exports are above expectations, even with price as high as it is. Corn as a feed grain for cattle, hog, and poultry, etc…. remains very steady. To counter high price supply must increase greatly. For supply to increase greatly. more acres of corn need to be seeded, AS WELL AS a perfect growing condition this summer. There appears intentions for growing more acres; higher by almost 12% more. But will that be enough?
Many market makers do not believe this will happen, therefore adding higher risk premium into the market price. If the Midwest does not produce a 12+ Billion bushel crop, then year-ending inventories will reduce even more.
Some market guru's are anticipating a sell-off; for reason the Spec. Funds hold a great amount of "paper" profit. That expectation of a fund sell-off has been around for several months, yet hasn't happened. In fact the Spec. Funds keep adding to their long positions….., does seem like they are interested in selling - YET. The market price of corn has just about DOUBLED from price of 1 year ago. Iowa believes the markets will remain bullish; at least until after spring planting season is completed.
Article of Interest:
U.S. grains and soybeans rally as fund money pours in
By Christine Stebbins
CHICAGO, Feb 21 (Reuters) - Chicago Board of Trade grains and oilseed markets were on fire Wednesday, led by the strength in corn futures amid active buying by commodity funds, traders said.
The CBOT corn market soared to a 10-year high, with soybeans and wheat following along. March corn <CH7> was up 9-3/4 cents or 2 percent at $4.25 per bushel by 11:50 a.m. CST (1740 GMT) after touching a high of $4.27. March soybeans <SH7> were up 9-3/4 cents or 1 percent at $7.80-3/4 a bushel, and March wheat <WH7> was up 13 cents or 3 percent at $4.77-1/2 a bushel.
"There's been fund buying in the corn. The market was able to rally into an area where it hit a lot of technical buy stops. It pulled beans along with it," said Mario Balletto, analyst with Citigroup. Commodity funds bought at least 6,000 corn contracts by midsession, traders said.
The rally in grains mirrored the strength across a range of commodities, with metals and energy markets also hot. In New York, gold futures rose $24 or 4 percent to nearly $686 an ounce on the COMEX division of the New York Mercantile Exchange. "There's a little inflation concern with the CPI being stronger than expected," Balletto added.
The Labor Department said Wednesday that the Consumer Price Index rose 0.2 percent in January, twice what economists had forecast. The core CPI, which excludes volatile energy and food prices, climbed 0.3 percent. "It feels like there's been a decision made to invest more money into the markets," said Roy Huckabay, analyst with The Linn Group, a Chicago-based trade house. "This is one of those days that there's been a lot going on. I'm not sure that they have to have a fundamental reason on a day like today to rally," he added.
End January 2007
The short break in prices that we saw in mid January seems to have ended. The market has climbed again, another $0.40/bu., which equals $0.80 per cwt. We did have a small sell-off in price earlier in January, but January USDA report indicated Bullish Data, and the market reacted strongly. Corn price has almond doubled in a year, thanks to ethanol. This is a huge jump. Speculators seem to still want to be holding their LONG positions. These positions will be sold at some point in time. Some rationing of demand has taken place in the feed markets, but very little.
Well, the New Year started the
commodities markets with a BANG to the downside. Market prices have fallen by
almost $0.60/cwt in the past few days. Prior to New Year’s the CBOT market was
testing all time high values; which translated to very expensive corn.
Since mid July / early August the nearby market has risen almost $1.25 / bu. which equals almost a 60% increase in value. Who knows if this sells off will continue, but most in the industry are guessing it will not. Fund Speculators are still controlling the markets, and their sentiment is still BULLISH. Demand is not rationing yet, but still an expected increased usage because of ethanol.
We will now have to see if some farmer producers are finally (or scared) into selling some grain.
Final End November 2006
Well, the short break in prices
seems to have ended. Since the previous market the market has climbed another
$0.22/bu. (= $0.45/cwt.). The small breather of a couple of weeks back seems to
have ended, and prices seem willing to begin climbing again.
In mid July the corn market was trading in the $2.40's, now values are trading in the $3.60's. That is a 50% change HIGHER in value. This jump is HUGE, and unprecedented. Speculators seem to be holding status quo with their LONG positions. Some rationing of demand has taken place in the feed markets, but very little. Farmers are still holding tight with their grain, not wanting to sell for fear they will miss out on a higher price later. An ethanol producer might be getting nervous with these prices for corn inputs. These markets are presently sailing in unchartered territories.
End November 2006
Well, the commodities markets seemed to taken a short break. Market prices only moved higher by $0.10/cwt. this past week - and for this market that is a breather. The market value did hit a high last week of almost $3.60/bu. Then settled back late last week to the $3.40/bu. area. This is still a jump of almost $1.20/bu. since mid July / early August. Maybe this market breather will equate to a short term sell-off…, who knows anymore?? Speculators continue adding to their LONG positions; which still equates to a Bullish grain market. The U.S.D.A. did trim corn's supply output in last week's crop release report. But the market didn’t move much with that bullish news; in fact it had a small sell-off. Demand will begin to ration; just when is the question. For the most part, fall harvest is now complete. A very good production harvest this year. Farmers are still holding tight with their grain, electing to while hoping that the price can go still higher. This may be a good strategy on their part, but it is creating difficulty to source grain to mill.
Mid November 2006
Since mid July the corn market has
risen about $1.25 / bu. This jump in corn values equates to an upward change of
approximately $2.50/ cwt for meals and flours and in the short term it seems the
upward movement has no end. Speculators continue buying LONG positions in the
grain markets. And with rumors/expectation the USDA will trim supply output in
its next crop release, the traders are fearing the worst..., fear of running out
So thus they continue pushing up price - scarcity, or fear there of, comes with a high price. There appears in the short term to be no end in sight for this upward price movement. Eventually upward pricing does stop, as higher prices ration demand. It will take time for demand ration to ease price burdens. A bushel of corn at $3.50/bu coupled with $55/br oil does not create positive returns for ethanol producers. Additionally livestock feeders will either reduce herds, or find alternative feed sources. As a result higher price values will generate more supply, but, all that takes time.
Fall harvest is almost complete. A very good production harvest from corn this year. Now the farmers are electing to hold their grain, and wait to see how high the prices will climb.
Early November 2006
Corn prices on the Chicago Board of
Trade rose sharply to 10-year highs last week, on concerns about the size of the
U.S. corn crop and ongoing demand for ethanol. With corn surging, wheat and
soybeans prices also climbed.
Corn gained 11.25 cents to $3.4475 per bushel, trading at their highest levels in more than 10 years. Surging demand for corn from the domestic ethanol industry and exporters has led the market higher for most of the fall. Although the United States is projected to harvest the third-largest crop in history, concerns about the effect that wet weather had in parts of the U.S. Midwest this fall has market participants concerned that the Agriculture Department could reduce its November crop production estimate set for release next week, after trimming its estimate in October to 10.905 billion bushels.
Since our last market update the
market has continued on it's roller coaster ride. The market price for corn is
virtually the same today as last month. In fact the only difference in this
price update -vs.- the previous price update is the higher cost of freight
Around the July 4th Holiday the market reached a trading high, fueled primarily by weather concerns (draught). The market traders were also having concerns about expected increased corn usage for ethanol production. What followed shortly after the holiday was a lessening of the weather concerns (at that time).
The market traders reacted with a major sell-off, with many speculators holding "Long" positions liquidating their positions mainly out of fear (of ideal climatic growing conditions leading to another huge, bumper crop). This led to an "oversold" position in the marketplace. Within the past week + some of the weather concerns have reappeared (hot/dry weather in the Midwest during pollination period = not good; too much stress on the crop at the wrong time.). The market price has since buoyed to what most consider an equilibrium.
The market traders are still very anxious with regards to this summer's weather, as the questions remains;
· Did the post-holiday heat wave put too much stress on the crop and lower yield outputs?
· Will expectations in ethanol production create a supply shortage -not this year or next year but maybe the following year?
· Will exports remain sluggish because of bird flu outbreaks around the world thereby lessening the amount of feed grain needs throughout the world?
Those are the most important questions traders are trying digest. We feel the market is undervalued for the long term. This does not mean prices will jump soon, but instead have gradual rise over time. The reason for this opinion is that it is not believed that this year's total corn production will equal the high expectations. It is believed that the weather patterns in the Midwest have been too inconsistent to provide for a huge, bumper crop. This will in turn lessen overall supply. And with expected increases in demand based primarily on ethanol production it is foreseen that the value of the commodity will be pushed higher.
Short term upside limiting market factors; good corn inventory from last year, and so far crops still appear mostly good.
Short term downside limiting market factors; continued good domestic demand (I.e. Ethanol and Feed).
Long term upside limiting market factors; must harvest a large, bumper crop this year, in line with trade and U.S.D.A. estimates
Long term downside limiting market factors; this summer's weather / potentially adversely affecting production.
Overall it is still believed that the market price is presently at a lower end of a short-term trading range.
Within the past week that correction
has occurred, and now the market is likely priced well. However a large amount
of monies from investment funds is pushing and pulling the market in various
ways. At this point it is not clear if the mutual funds will continue pushing
the price lower, or will add to their positions now that the price is less
Within the next several weeks’ weather patterns will have foremost affect on the price. Presently this year's corn crop is off to a good start; but has a long way to go before harvest. If weather continues to cooperate, look for prices to maybe fall slightly more. But if weather becomes non-beneficial, then expect prices to rise quickly.
The Limiting upside market factors: HUGE corn inventory, good spring weather - crops are growing well.
The Limiting downside market factors: GREAT domestic demand (I.e. Ethanol), inflation hedge funds are still using commodities markets as a place to maintain liquid stability -vs- U.S. inflation.
The market is now slightly oversold. Maybe too much price correction? Either way we think the market price is now at a lower end of a new trading range.
End March 2006
The market has taken an unexpected
drop last week and a half. It has moved down approx. $0.20 per cwt. Small
changes in the Midwest weather patterns affected the mood of many traders.
When the market began to slide, many mutual fund managers became scared, and liquidated their long positions. This selling frenzy added fuel to a downward spiral.
Presently the market appears in a freefall. However, the same weather concerns that prompted the market up 2-3 weeks ago are still intact. Therefore this recent downward correction, while significant, might be short-lived. There are still major concerns about KC Wheat. Those Plain’s wheat concerns could spark another rally in the KC futures exchange. If that happens, then that would be bullish to corn as well. Limiting market factors are; HUGE soybean carryover (domestic and Worldwide). Also, there is still a large surplus of corn in the Midwest, though estimated usage is growing. The market is now oversold.
End February 2006
Within the past week and part of
last the corn market took a major step higher. Prices climbed as new monies came
into the market from Mutual Funds. In the past couple of weeks these speculative
Funds went from being "net Shorting" the market to "net Longing" the market.
Presently they hold a major "Long" position.
This buying frenzy by the Funds created a self-prophecy, the more they bought the higher the market climbed; and the higher the market climbed the more they bought.
The question now is when will this upward momentum run out of steam? There will be definite topside. There is too much grain (corn) in storage to have a runaway market. Corn is presently trading not on it's own Supply/Demand fundamentals, but rather following a drought concerned Wheat market. The Hard-Red Winter Wheat market has made many nervous traders (KC Futures Exchange). The continued dry/arid conditions of the southern Plains (OK, TX, KS) are creating potential for a very short crop. That weather concern is beginning to have a spillover effect in the corn markets. Hence why the Mutual Funds are presently betting heavily on higher corn values.
We would look for the market to remain semi-volatile now until spring plantings (mid April). The market could likely climb a little higher, but then likely come back to present levels. We would not expect the market to make a move back downward to levels of a month ago.
End January 2006
The market retracted a little from
last week. During this past week the market moved DOWN approximately $0.05 cents
per cwt. The mutual funds were heavy “Short” sellers, trying to push the market
downward, however most of the markets “short” sales were covered by commercial
buyers (buyers such as Cargill, ADM, ConAgra and the like). The commercial’s
buying activity seems to have buoyed the market, and gives another reason to
feel the market is in for an upturn (for the short-term period).
The soybean market did react negatively to recent crop developments in South America. Seems both Brazil’s and Argentina’s growing regions received beneficial rains. Corn and Wheat are still following the market lead of Soybeans. Therefore Soybeans will continue for the time being to be the driving force in the commodities markets. But come late February early March the commodity market leader could turn to wheat. Traditionally that is the time the central Plain’s wheat crop typically begins to come out of its winter hibernation. Many wheat analysts are concerned about the possible crop affects of a very dry fall and winter. If drought-like conditions persist through springtime, wheat values will likely rise and corn values would likely rise with them. But corn does have an upside limit because of the massive amounts presently in storage. The primary question remains at what price will producer farmers be willing to sell that stored inventory. Presently the price of corn is too cheap for them to be willing sellers.
The corn market seems to have
settled a bottom, and is beginning now to show signs of upward movement. During
the past couple of weeks the market has moved Up approximately $0.10 - $0.15 per
cwt. This recent movement is mostly market timing.
Most of the Mutual Funds, which held heavy “short” positions, took profits for end-of-year financial results. Also, the Soybean market has been the driving force behind recent upward trends. This market remains sensitive to dry weather conditions in many soybean-producing areas of Brazil and Argentina. Many of the other commodity markets are playing “Follow-the-Leader”. Most analysts believe the next critical market area is wheat. Last year world wheat production was average. Couple that knowledge with concerns of dry/arid conditions in some wheat growing areas here in the US (OK, TX, KS, NE) and the drought-like conditions persisting through springtime, wheat value will likely rise. And corn values would likely rise with them.
However one must also remember corn production has had 2 super-bumper crops in secession. There is a great amount of inventory of corn in the country. This will have some limiting factor on price appreciation for the corn market. Transportation costs are remaining firm.
The market is still continuing to
slide lower, trying to find a price bottom. Another HUGE crop is being
harvested. This year’s fall harvest not quite as large as last year’s record
crop, but still very large.
Fundamentally the market continues to be oversold, with the funds having significant “short” positions. Although domestic demand for the grain is strong, export demand is slacking (transportation costs too high to compete). But with these very low prices the farmer producers are not marketing their grain. They are storing as much grain as possible; waiting for higher price values. This is creating a short-term shortage of grain moving to market users (such as commercial users like Iowa, ADM, Bunge, Cargil) thus some markets in the interior Midwest are actually bidding higher to purchase the grain than the futures exchange in Chicago is bidding for the grain.
This situation will likely stay until after the first part of next year, then farmers should begin marketing the grain to raise cash for their next year’s input expenses and taxes.
Therefore the present commodity risk is not in the futures exchange, but rather in the local interior markets. It is expected that that the CBOT market prices to continue to grind slowly downward, likely another nickel, maybe a dime. There is no significant news to begin to propel prices upward,… yet. Last year market hit low in mid-December. We expect similar situation this year. Fuel / Transportation costs seem to be remaining static.. finally. Hopefully this will remain for a while, or maybe the price of diesel fuel will begin to significantly decline, back to levels of early last spring.
‘We will have to wait n see. Please call if you have any questions or concerns.
The market is still continuing to
slide lower. The market is still oversold; as the market traders are expecting a
VERY BIG fall harvest. This year’s fall harvest is said to be expected to
challenge last year’s bounty as the biggest crop on record. Its felt by Iowa
that it probably won’t equate to last year’s harvest, but just to be close to it
is still a very large amount of grain.
Currently the Funds are in a very “short” position.
Harvest weather has been cooperating with the farmers. Because of the very low prices, not much selling is being offered by the producer-farmer. They will more likely store as much grain as possible, waiting for higher price values. But there is not enough storage space for all the grain, and some will be forced to the market at very cheap values. Iowa expects the market prices to continue to drop as harvest continues in the Midwest.
Higher fuel costs are affecting price right now MORE than grain prices. Diesel fuel and transportation costs continue to move up with no sign of relief. To put it in perspective a little, take note that in the summer of 2004 the average transportation costs into Metro NY were about $4.50 per cwt. for Iowa. Today with increased fuel and fuel surcharges, coupled with higher freight rates, transportation expense is about $6.20 per cwt. That is about a 40% increase in freight costs.
End August 2005
The market finally has begun to show
signs of some relief as it begins to slide lower. Fundamentally the market is
oversold, but the funds have switched from net “longs” to net “shorts”. This is
creating a market depression.
For the most part, the crop appears in good condition as we now awaiting harvest time. There are a few pockets in the Midwest where the crop was severely stricken by the summer’s draught; those are considered small areas of the growing region.
Prices will also be weighed down upon because of glut of last year’s corn still on the market. However, fuel costs are still greatly affecting price. Diesel fuel and transportation costs continue moving up without any relief in sight. The fuel/transportation costs are having greater impact on price than is cost movement of grain. It was just reported in an article in an issues of USA Today this week, that the nation's small businesses have been some of those hardest hit by gas prices that are up 39% from a year ago. Such companies are simply not as easily able to shift the costs to customers.
It would also be wise to watch the effect of this past weekend’s devastating Hurricane. A large portion of the US Distribution System was brought to its knees because of this weekend’s storm in the south. Ports still remain closed from Louisiana to Florida and some 300 barges containing grains and other products are reported to be left homeless. This logistical logjam could delay the production of hundreds of everyday products. The result is that consumers, even those far from the storms epicenter might have to pay more for goods.
This past week the corn market had
another sell-off (about $0.10/bu.) That type of decline would normally reflect a
price decline of about $0.20/Cwt.
This price decline continues as the mutual funds are selling out of their speculative "long" positions. And there are currently not enough commercial buyers to absorb all the funds positions, therefore the net affect is for prices to drop.
Pricing is likely now too low. There is still a great amount of uncertainty regarding how much affect draught conditions in parts of Illinois, Indiana and Ohio will have on overall crop yields. Crop conditions in many other areas of the corn-growing region in the Midwest look favorable. The market traders are now expecting a "good" harvest yield, but still a lot of uncertainty. Because of the funds liquidation, the price value of the commodity is probably now too low.
The other major affect on delivered price is the rising cost of fuel/transportation. Crude oil now trading at the $65.00/barrell ...gasoline and diesel fuel are climbing higher again. The most recent price jump has affected our delivery price by approx. $0.20 Cwt. From last summer to now, cost of truck freight has increased over $1.20/bag. It might be the fuel expense adjustment might have greater impact on delivered prices than the price of the grain itself.
Mid July 2005
Corn prices rose to the highest
level in about a year last week (7/11), and soybeans gained, on concern that
unusually hot, dry weather will linger in the Midwest through the end of July,
compounding a month long deterioration of crops. The higher prices are not much
comfort to farmers who are seeing their crops die due to the hot dry weather.
The weather is only getting worse. Temperatures may reach 100 degrees Fahrenheit across the western Midwest, and rainfall will be below normal all of which is during a very critical time for the crops. Corn prices have jumped 11 percent in the past month as a drought eroded the condition of crops in the United States, the world's largest grower.
Thousands of Illinois farmers are faced with a corn crop that could yield only a tiny fraction of last year's harvest. The drought stifled development of corn plants so they didn't send out ear shoots and silk in time to catch pollen falling from the tassel, and no pollination means fewer ears of corn or ears with no kernels. It looks bad, but it could really be very bad and we should know more in a week.
After two consecutive years of record corn crops brought on by nearly ideal growing conditions, drought this year will likely mean a much smaller harvest in Illinois. No part of the state has been spared from drought, according to the U.S. Agriculture Department.
Hurricane Dennis' remnants provided some relief to southern Illinois this past week with up to 5.5 inches of rain, but northwestern Illinois received almost no rain and precipitation statewide remains nearly 4 inches below normal for the year.
We will continue to keep you up to date.
For the past many weeks the corn market has been in a steady trading patter-Until Today! Today, the market took a drastic price up, almost $0.40/Cwt. This price rally is because of continued dry weather conditions in a large part of the eastern region corn-growing areas. The market traders were expecting rainfall over the July 4th holiday weekend for those stressed areas, but very little developed, and very little accumulation fell. The traders are now concerned the continued lack of moisture on the crops will deteriorate yields on this fall's harvest. In the corn-growing areas where dry weather is persisting the crop is beginning to show initial signs of stress. This draught fear is creating much concern among the traders, thereby elevating price, putting a weather premium for their draught concerns. Today's unexpected and drastic price rally pushed through an earlier price ceiling of about $2.25/bu. This would indicate prices are likely to go higher in the short term. The mutual funds are the major impetus behind this sudden price rise. They are now long in their positions. Price fluctuations will likely be very dramatic during the next 4-6 weeks, as we are presently in a "weather market".
During the past couple of weeks the
corn market has had a slight upswing in price. Overall the price has risen about
$0.15 per bu. (which is equal to about $0.30 per cwt.) This price rally has been
due to dry weather conditions in a large part of eastern region corn growing
areas. Presently the crop is NOT under any grave stress – it’s still a bit to
early for that. However the dry conditions have created some concern among many
traders – dry equals drought fears.
The market price has been trying to rally to it’s early spring high of about $2.25 per bu. That seems to be where there is a price ceiling. If the market price goes through that ceiling then it is believed it will continue higher.
The mutual funds have evened their positions – neither long nor short. They too seem to be waiting on more developments with the weather. Weather trading pattern usually doesn’t start this early in the crop year but now that it has it will continue to be dominant issue in the traders’ minds.
Summer coverage is not a bad idea but here on the risks; if a rain pattern develops in parts of dry Midwest between now and end June, then prices will fall and most likely quickly. If the dry weather patterns continue, then the price will continue rising.
The corn market has remained fairly
flat the past couple of weeks. The market price continues to be buoyed around
the $2.00 / bu. area. The mutual funds have a large amount of “short” positions
in their holdings, but in these past couple of weeks, they are No Longer adding
to those “short” positions.
As a result, the market sentiment continues to be Bearish. There is a Huge stockpile of last year’s harvest yet to be brought to market and Demand is very much an unknown.
Domestic demand is very strong especially for industrial ethanol production, and livestock feed. Export demand is weak, especially given the fact that the US trade dollar has been so low. The weak export demand is a bearish sign to the marketplace. Much of that news re; weak export demand, has already been factored into the market’s price. Farmer producers are still being bull-headed; holding off marketing the grain in hopes for a rise in prices.
The past couple of weeks the corn
market did have a small sell-off. The early spring rally was limited to a market
price top of about $2.25 / bu. The mutual funds (which propelled the market
solidly up) have again been selling their positions; and now are starting to
sell the market “short”, thus the recent decline in market price.
The corn market has found a comfortable trading range; presently it is trading near/at the bottom of that range. Fundamentalist traders still point to fact that there is a HUGE amount of corn from last year’s harvest that needs to come to market. Thought the US domestic markets are pulling strong usage, the export demand is lacking.
These facts are having some negative impact on market pricing. Spring planting season in now underway, remaining mostly on schedule. Many farmers/growers are now focusing attention on spring plantings, therefore little attention on marketing grain. Because of this fact local market users are forced to bid up spot cash price to attract attention, and secure grain for usage.
So far this spring there has not been any weather scare to prompt values higher, but caution, the spring is still young. Early report of South American crop harvest is “average”. The trade was expecting this type news. Crude oil prices remain having an affect on grain commodities prices. Investors still putting money into oil markets (from other markets; equity, bond debt, commodities). Crude oil prices are also having a major affect on all manufacturers’ cost structures (higher utilities costs, etc), It is believed the grains’ markets are still undervalued. However the traders are now more Bearish than Bullish.
End of March 2005
The corn market had a small sell-off
in past few weeks. The mutual funds (which propelled the market solidly up) have
begun liquidating some of their positions, thus the small sell-off.
It appears the market is reacting more to mutual fund buying/selling activities, rather than supply/demand issues. Fundamentalist traders still note there is a HUGE amount of corn from last year's harvest that needs to come to market. That knowledge should have a tempering affect to any major price spike.
Presently the market appears to be a bit overpriced. Traders are putting a small amount of risk protection in the price because we are now entering spring time seedings for this years crop. If the Spring time seedings have difficulty (too dry, wet, hot etc..) then market will rally again. If the spring planting season is normal, expect to see pricing stay steady or grind lower. Also keep in mind that Crude Oil prices do have an affect on grain commodities pricing.
A fact that needs reminding is that the grains markets were quite undervalued for much of the winter. We feel this is NOT a good time to extend contract buying, instead it might be better to "spot" buy The market could go lower, possibly by $0.10 per Cwt. for coverage through June.
The market had a sudden jump early
last week, moving higher by about $0.15 bu. (approx. $.30/Cwt). This jump had
more to do with the funds covering their positions than with Supply/Demand
issues. The market is also reacting to soybean trading, which boasted a major
upswing on information regarding possible weather related production issues in
South America (dry in some soy producing areas I Brazil). The other influence in
this recent market rally has been the run up in crude oil prices. With the oil
commodity drawing great attention, other commodities (grains) were following
Many traders expected a sudden jump in corn prices, primarily because it has been undervalued for such a long period of time. But, most of these same traders did not expect the jump to be this quick, or this much.
Therefore look for the market to slowly drift lower again, but not likely to the levels of 3-4 weeks ago. In our humble opinion, this is not a good time to extend contract buying, instead it might be better to spot buy. Market prices should go lower, possibly by $.10-$.15 per Cwt. If so, then look to extend some buying coverage!
Early February 2005
The corn market remains fairly
stable, although it did decline somewhat the last few weeks. The price continues
to be buoyed around the $1.95 - $2.00 / bushel area. The mutual funds continue
to hold a lot of "short" positions, perhaps trying to push the market lower.
However the market price is now at record lows; wondering how much lower it can
There is a HUGE amount of grain yet to be brought to market. To date most farmer producers have held off marketing the grain, hoping for a rise in price. But their time is limited and they will have to eventually market their grain before late summer / early fall.
The market jumped slightly higher
this past week, approximately $0.10 cents per cwt. higher. This slight market
price jump was more due to the Funds buying back/covering their “short
positions” than because of Supply/Demand issues.
The overall market sentiment is still Bearish; although some traders do firmly believe the market continues to be undervalued (most feel those traders just do not have enough convictions to begin buying/ holding to “long” positions).
In the next few weeks the market may try to go lower, but presently we are at very low levels. Pushing prices lower might be difficult. This will mostly depend on export sales (which are currently behind pace.) Most farmer producers hare holding grain in storage hoping for prices to rise.
Early December 2004
The Corn Market has remained steady the past few weeks. Trading has continued in a sideways pattern. Overall the market is still Bearish, trying to find ways for demand to consume this year’s Huge Crop. The market tries to go lower, but we are presently at very low levels. Pushing prices lower will be difficult, but before a price upswing occurs, the market will need new, fresh, positive news from a demand / usage perspective.
Late October 2004
During the past few weeks the corn
market price has remained steady. Most in the industry are somewhat surprised
given the HUGE crop presently being harvested. Given the price stabilization
many market traders are concluding the Bearish market trend has found a price
bottom - or at least resistance. So the question remains, "is this a true
bottom, or a temporary stay…??"
Technically and fundamentally the market price is over-sold. There have been some active buyers in the market in the past few weeks. Many of the commercial users (large livestock feeders, ethanol producers, etc.) have begun buying the corn while it is stil inexpensive (as opposed to waiting for possible lower prices). This is creating an Interest in the Supply side of the equation, and buoying prices.
Whatever harvest pressure existed to push prices down seems to now have faded. Crop yields are Fantastic, beyond most traders' expectations. This information alone should keep a lid on a runaway market price - allowing an informative approach to forward contracting.
During the pasIt's the first week in
October and the corn market just continues to sell off. This past week the corn
market lost another $0.04 per bushel. Fall harvest in the Midwest Corn Belt has
begun, and so far early indications of yields are astounding. This continues to
push Bearish sentiment with the traders. Presently the only concern for the
traders is just How Big the crop harvest will be; there is no focus or interest
yet regarding demand (or usage). There has not been any news (on demand) to
break the bearish momentum. Psychologically the market has a downside barrier of
$2.00 / bushel. We are very close to that level.
Iowa's opinion remains to wait, give time for harvest to progresses, and see if the $2.00 / bushel floor is broken. If that price level is broken, then the market will likely fall more. If not, then additional coverage should be considered. Within this timeframe it does not seem likely that there is much upside price risk.
Late September 2004
During the past 10+ days the corn
price continued to weaken. In total the market lost about $0.15 per bu. which is
equal to about $0.30 / cwt.
The market trend is still Bearish. However there have been a couple of small signs that this down trend might be turning. We are still likely to have an opportunity for a couple more weeks to see if the market can fall further but we are definitely in a watch mode.
The market price is very depressed because of expected HUGE harvest. The harvest is well under way in most parts of the Midwest. Still too little data to develop trends for yields, but initial reports are stating Great Crops. Crop conditions continue to be excellent. In addition, so for weather patterns are favorable for crop’s final push to market.
Technically and fundamentally the market is oversold, but there are very few buyers in the market presently to give upside pricing potential to spark the market. The market is heavy in the “shorts side”.
The corn market continues to grind
lower. The past couple of weeks the corn market lost another $0.10 cents per
cwt. Fall harvest in the Midwest Corn Belt is around the immediate corner, and
the market traders are projecting a HUGE harvest. This continues to set a
Bearish tone with the traders.
For the past several weeks the traders have been focusing only on Supply, which is why market price continues to deteriorate. After harvest the demand concerns will again take focus, and price will most likely move upward. But, lately there has been no big news on demand to stem the bearish momentum. This downside will have a bottom.
The trick is to now see how the harvest progresses, and see if traders will continue forcing prices down. Currently there does not seem to be much upside risk.
As a point of interest, prices today are VERY inexpensive today – vs – this past summers prices.
After the past 2 weeks plus market,
the corn market seems now to have settled into a comfortable trading range. This
past week the market gained about $0.10/bu. early, only to give back $0.12/bu
late in the week.
Since our last update, the market has lowered about an additional $0.02/bu., which is equal to about $0.05 per cwt. Presently price is very depressed because most all traders are factoring in a HUGE crop to be harvested in the U.S. this fall.
Crop conditions continue to be excellent, although some weather forecasters have hinted at possibility of an early frost - this would NOT be good for the yield potential.
Fundamentally the market is oversold, but with every attempt to propel prices upward comes many risks - agreeing to sell forward a commodity still to be harvested. The overall feeling is the market lows could still come before harvest, then prices will begin inching upwards.
The corn market continued its slide
again this week (the week of 7/12/04), falling another $0.10/bu (=$0.20/cwt.).
The market is presently Very Bearish. To date the weather in the Midwestern U.S.
Corn Belt has been perfect for growing conditions. Right now the crop conditions
look very favorable for a record harvest, but there is still a long way to go
between today and harvest in October. The market traders are anticipating a huge
crop to be harvested this fall, therefore the reason for the dramatic sell-off
the past 6 weeks.
Demand for corn usage is still very strong. Fundamentally the market is now likely oversold. However the commodity hedge funds/speculators and mutual funds continue playing the market short. This is continuing to put downward pressure on prices.
The corn market slid slightly this past week (week of 5/17). The Bearish movement is definitely slowing, maybe approaching the bottom. We believe that activity early this week should give indication to market direction over the next couple of weeks.
If the market begins to rally back up, then likely the “short-term bottom” has been reached. If the market continues to move lower, this could mean more momentum pressure downward. If/When the market stabilizes it should indicate a buying opportunity through the end of the summer (August / September).
Over the past few months the corn market has been a follower of the bean market. Soon thought it will likely begin trading in similarities with the wheat market: as wheat market is now moving to its critical trading time of HRW’s harvest. Any early harvest yield reports of “less-than-good” will likely push the wheat market up; and the corn market pricing will likely follow. Growing conditions for corn remain very good. But conditions and weather forecasts for corn in May/June are not nearly as important – vs – corns growing conditions and weather patterns in July. General trade sentiment is the market could remain relatively steady to lower until mid June, and then will likely begin another upward push as growing season enters very critical July growth point. If weather forecasts for Midwest corn growing area are predicted to be hot/dry during July, then corn prices will rally in a hurry. If weather forecasts for Midwest corn growing area are predicted to be cool-normal/wet during July, then corn prices will go south. Technically the corn market now has price resistance in the $3.00 / bu. area, but it also has some buying support in the $2.90 / bu. area.
The past few weeks the corn market found new “rocket-fuel” to faster propel its sky rocketing pricing. The market price for corn on the futures exchange is at its highest price level in 10 years. In the past past week alone the market jumped approximately $0.20/bu which equals about a 7% increase in one week.
Since beginning of the 2004 year, the
All Grains’ markets have had a very BULLISH run the past 12 weeks. The soybean markets have led the charge, followed closely behind by the corn market. The wheat market has risen, but not at the same dramatic pace as soybean and corn. This could mean the wheat market still has much room to move higher, and likely will.
Technically the corn market has finally found some price resistance in the $3.40/bu. Area. The mutual funds’ speculators are still VERY LONG in the marketplace, and still the major force behind this volatile upswing.
Supply wise – the crops in
Those of you that choose to contract a few weeks ago are Very Heavy “in the money”. Watch the markets carefully and remember to sell against your replacement costs.March 2004
The corn market climbed to a 6 year High this past week before giving back a small part of it’s gains. The corn market (like all US grains) is Bullish. For the past couple of weeks the corn market has been following the lead of the soybean market. The soybean market has moved aggressively higher on reports of “less than expected” output from South America. The key factor with corn pricing presently is export demand. With China not exporting corn, and looking to import wheat and soy products, the US markets are reacting very aggressively as now much of the world demand needs to come and buy from US grain inventories. This situation has pushed the corn and soybean markets to set new contract “highs” and the wheat market could be close behind. Much of the fast-paced appreciation in the markets is because many of the mutual funds investing in the grain’s markets are “net longs”. At some point these funds’ positions will be liquidated for profit taking. Many analysts had believed that this profit taking scenario wold have taken place already, but it has not.
Long-term corn prices will likely remain at these levels until demand can be rationed. The US will need a bumper crop in both corn and soybeans to help replenish inventory supplies. The probability of the US producing a record-breaking bumper wheat, corn, and soybean crop is not statistically high. Therefore theory would say prices will go higher before fall harvest.
The corn market is again starting the week in an upward trend following a roller-coaster ride last week. The corn market climbed $0.04+ per Bu. (approx. $0.10 / cwt.) and the market seems to want to find its new equilibrium following 3+ weeks of steady climbing. World wide all grain stocks are very tight, therefore fundamentally the market is nervously Bullish but technically the market is finally meeting some price resistance at the current levels. This could indicate a possibility of nearby Bearishness (mutual funds liquidating positions for profits) but in order to have a quick sell off at this point, the market would need to have some very negative news against it.Stay aware of the flu virus invading poultry in Southeast Asia. This could be just the news to turn mutual fund grain buyers into quick sellers. Supply wise the crops in South America are entering major growth stage. Therefore the market will keep a close eye on weather developments in those main grain growing regions of Brazil and Argentina. If a small break comes in price over the next month or so, it might be prudent to lock in contracts through fall (new crop). Prices will appear to be high, but could very well end up being great bargains if the US crops have any weather hiccups this summer.