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| What should producers be watching for a potential rise in corn and/or wheat prices from a fundamental only standpoint?
South American weather is a key for the next 120 days or so.
Why? This is a key period in South American production and there are signs of a LaNina developing which could be very price positive - IF - it occurs. NOTE: in mid September the U.S. Climate Prediction Center put the chances of a LaNina arriving sometime in the November to January timeframe at 55-65% with the next update due on 11-9.
If you look at just ending stocks in my key exporting nations (without the Chinese stocks of 3.118 billion Corn (39.4% of world ending 17/18 corn stocks) and 4.675 billion of Chinese Wheat stocks (47.5%) of ending 17/18 world stocks), you find that a drop of 22.9% on the Brazil/Argentina corn production to a level still 380 million bushel above their 2015 production level (a lower production year) would bring combined corn and wheat ending exportable stocks to a level roughly equal to 2013 when the average U.S. price of cash corn was $4.46 vs. the current projected $3.20 level for 17/18. This review includes the extra world wheat stocks on hand as some of this would go to offset a lower world corn supply.
A 14% drop in South America corn production fundamentally moves exportable nation stocks down to an area where the average U.S. cash corn price could be $.50 higher than the current $3.20 forecasted average price for corn.
Due to this, some who sell corn now may want to look at buying a MAR 2018 $3.70 corn call for a cost of around ($.10) to replace the sold bushels.
EDITED to add the key exporting nations I used on Corn were the USA, Brazil, Argentina, the EU and the Ukraine and on Wheat I used the USA, the EU, Russia, Canada, Ukraine, and Australia.
Edited by Citi Farms 10/26/2017 11:10
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corn fundamental review
