In a van, down by the river. | It's really uncanny how this year's DEC corn price is following the pattern of similar prior years (as shown in the updated correlation chart). I don't mean to suggest that these correlations are a crystal ball, but I do believe they can provide some valuable perspective about where we are in the cycle of market psychology. From beyond this date, three out of the four analog years (1987, 2007, 2009), experienced a meaningful rebound in prices that lasted at least deep into November. In the other year, 1994, prices stayed pinned down (in the low 2's) until December, then went on a nearly $3 bull run. I will be surprised if the market doesn't take a stab at some of the previous support levels, the first of which I believe is around 3.18 (?...front month or DEC?...whatever), but I will be even more surprised if we don't find a bottom in prices between now and Labor Day, and then see a recovery similar to the years shown here.
Given where prices are today, many of my customers feel under-sold on their new crop, and in many cases still have considerable old-crop to move. Could we see something like 1994 where we get "pinned down to the mat" and just stay there for months? Yep. Could we see a low on the board below $3? Absolutely. However, at those price levels I would be a very slow seller, and would either use minimum price or basis contracts on at least a portion what needs moved. Also, for those of you fortunate enough to have contracted new-crop corn at higher prices, we may be on the cusp of a golden opportunity to buy-in those sales via cheap calls.
I am anticipating a very large corn crop which will be much more difficult for the grain handling system to swallow than in recent years, and in our business we are doing what we can to be prepared to handle our producers' grain. However, it is this new-found fear of a "monster crop" that could create a pre-harvest low, followed by a price recovery during harvest. That would simply be the inverse of what happened in 2012. As expectations for the size of the crop expand, so too does the probability of being disappointed. Are we approaching the point where a trendline yield, or anything less than a new record, will be a disappointment??
Edited by Rob.Cogdill 7/23/2016 10:25
 (DEC Corn Analogs.jpg)
Attachments
----------------
 DEC Corn Analogs.jpg (89KB - 85 downloads)
|
When lows will be made...?
