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SC Iowa |
in regard to the "why don't traders care" thread below...
1) ending carryout stocks----every time the industry went through one of those "near death" tight carryout stocks experiences, it always seemed to me they learned something about how to manage with even tighter stocks the next time it might happen.....which means that corn supply would have to get even tighter to get the old response......and I think the "world" keeps getting better at swapping supply around if needed as well....I fully remembered the outcry from the 1997 bean import situation......but that was then, this is now......hell, it might even be CHS doing the importing should it happen again........to be honest, the grain does not have to be imported-----just the chatter is enough to have the desired effect of loosening old crop supplies in the US
2) you WILL know when traders start to care......and it will be on the screen for you to read......back on May 1, the spread between Dec 17 and Dec 18 futures was a 14.5 cent carry......since then the carry has gone out to 29-30 cents, indicating a belief that "someone" is going to need to be paid for carrying 2+ billion bushels across the old/new transom........if/when that Z/Z carry starts to shrink, it will be an indication of concern about the crop size...
BUT.....even if the carryout for Sept 1, 2018 starts moving to 1.6 byn or less, we still have this issue of the almost 2.4 billion carryout to contend with this year, and that really IS the issue......I call it the "pig in the python" situation as the market, no matter the size of the new crop supply, has to work the end of season supply into the system......
WHEN CAN THINGS CHANGE-----knowing what we do today, the trade has to see that the 2017 crop will fit into storage without "a ground pile on every street corner" this fall.......so maybe half or 2/3 of the way through harvest, the industry will have a much better handle on corn yield and storage.....and that is likely when market psychology can start to shift.....
3) SA.....look at the total corn supply available this year vs. last......a year ago at this time, our US corn exports were ramping up nicely as the SA short corn crop was forcing strong basis levels in the Brazil interior to keep corn from leaving.......this year, they have much larger supplies and US corn is finding stiff competition, even with our wide interior basis levels....
TACTICS------if you are true believer in the "crop is way short" mantra, you are going to want to find ways to (eventually) be long the front end and short the back end of the corn curve.........two ways to do that.....from a purely spec angle, being bull spread the Z17/Z18 contracts is way to go......if you are right, that spread will move 35-50 cents from where it is today....
if you are a hedger, getting your short Z17 hedges rolled out to Z18 if one way to play it.....that means you are "bull spread cash vs. futures" and your cash position will gain value more rapidly than doing nothing....
as always, it is YOUR money and make decisions accordingly
Ray J
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A few comments
