East Central South Dakota | Farmers are bred to produce---it is what we do. Rally talk is front and center and most farmers want to talk production cuts/supply and yield. I am firmly in the camp of this is a demand rally with the energy of weather feeding the uncertainty and price action---which brings volatility and opportunity. I am pretty bullish on this rally but sold some old crop corn today as the bins are too full for splitting the queens on this rally.
The world had somewhat tight stocks in corn since harvest, with most of the stocks in the United States and China which means the United States. I have been very disappointed with corn price reaction to exports and domestic demand all year. We have been selling the crap out of corn, and we will shatter the old export record this year. The root cause of my disappointment is we raised a heck of a lot of bushels last year. I shudder to think where we would be without exports in my back yard.
Last year the argument to support the national high yield in corn (was probably pretty close by basis reaction all year) was the outstanding yield in the fringe county. I believe that argument. I believe USDA missed South Dakota by 4-5 bushels to low. If you believe that argument of the high yield in the fringe raising the national yield---you have to believe the weather in the next two weeks has the potential to decimate the yield in the fringe and thus the national yield. Take away 3-5 bushels in the corn belt and we are tight at this demand level.
We are pretty much the only game in town for corn exports all year and we raised a lot of it. We put it on sale and sold and fed a lot of big piles of corn. I believe in the supply, demand and price concept. We lowered price to create demand to get rid of supply. Now we have this huge demand base to feed and supply comes into question. Corn still has a lot of value at these prices, supply is in question, so what does price have to do? Price has to curb demand to meet supply and that isn't happening today.
Demand rallies are very hard to negotiate, and a lot of producers sell to early because they still see a pretty decent crop and they talk and live production. I had to take some old crop risk off the table today, but I don't really feel that good about today's sale. We aren't inverted, but demand rallies are just as hard to sell as an inverted market. Inversions can continue forever, carry markets eventually reach full carry and are sold.
Myself, I am going to watch a potentially very good crop get destroyed the next two weeks. It's just my turn. We have had some very good crops the last 8 years. If you are going to have a good crop, maybe remember that demand rallies will go way higher than you think makes sense----when your combine yield monitor is singing an up lifting jazzy tune. Good luck to everyone in the kill zone this weekend. |
Rally with the stamina of demand.........
