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Feeling a little déjà vu? Just like at the end of February, markets fell hard into the end of April on demand worries and thoughts of the new crop satisfying the world’s needs.
In a week’s time, May corn dropped nearly 45¢ from a high of $682-4 down to $6.38 at the time of this writing. Concerns for South American competition, lack of Chinese demand, sales being canceled, and fund liquidation brought us back to this level. The question is whether the selling will dry up at month’s end or break down to the $6 level next. December corn has also fallen due to less concern over planting delays and money flow. It’s likely we’ve seen the largest planting intentions number since there will be delays in the northern corn belt, enough such that there may be some acres of corn switched to other crops. This could eventually provide support to new crop corn prices.
Soybean prices also fell out of bed, driven lower by Brazilian competition, soybeans brought into the country and prices, and a much lower basis in South America. The $15 area is major resistance and when traders had no additional bullish news to pull through that level last week, sellers headed for the door as word of beans entering the U.S. from South America and China’s U.S. purchases non-existent. July beans dropped from $15.01 down to $14.05 area, nearly a $1 down in seven trading sessions. Also, new crop beans fell from $13.25 to $12.56-4 in that same period.
Look for this kind of volatility to continue into summer. There remains a tight old crop supply of corn and beans domestically, and we still have a lot of weather and planting progress to get through. You need to get your price projections in mind, so if prices should rally back, you can get sales as well hedges put in place. Look to increase sales of new crop corn near $5.80 December futures and new crop bean sales near $13.20 November futures.
Due to the large Brazilian corn and bean crop and relations in China, it may be difficult to get prices you obtained last year. You can always re-own with call options once sales are made to stay in the market should prices go higher. But the better part of valor says, get your sales on the books in case they don’t. Historically prices are still better than average, and sticking to a disciplined approach with your incremental sales is the best way to improve your overall price average and profitability.
The next USDA Supply and Demand Report will be out May 12. The last couple of years, markets have experience big price swings following this report so be prepared.
ABOUT THE AUTHOR
If you have questions, you can reach Cathy at [email protected] or visit www.TotalFarmMarketing.com for more information.
Cathy Ekstrand is a senior market advisor with Total Farm Marketing’s brokerage arm, Stewart-Peterson Group Inc. She currently works from her home in rural Yates City, IL. After graduating from the University of Illinois with a degree in AgCommunications, Cathy’s resume includes working for Shissler Seed Co., now LG Seeds and Galesburg Register Mail as well as a position in sales while staying at home with children. She began her career with Stewart-Peterson in 2001. She works with farm clients across the country and has presented at Annie’s projects all over the state. She and her husband have a small farm and encouraged their two sons to pursue careers in agriculture. Cathy and her husband Roland are also grandparents to three beautiful children, two boys and a baby girl.
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