Unattractive corn, soy prices could get worse, analysts say
With futures prices trading lower and cash prices for corn and soybeans between 10-12 week lows, market plays are hard to come by.
Analysts are split on whether farmers should consider protecting the downside.
In a daily newsletter, John Roach, Roach Ag Marketing, Ltd, said ignoring the corn and soybean markets, waiting to see what the weather does is a recommended option.
"We use sell signals to sell increments of the crop at market peaks to reduce stress when prices are cheap. We encouraged our readers to sell aggressively at higher prices and will wait for the next sell signal to make additional sales in corn and beans."
Roach backed up his wait and see attitude when a customer asked this week if it was too late to buy put options on November soybeans.
Roach's response was short and to the point. "I am not much interested in buying any puts with prices so far away from a sell signal."
Ron Mortensen, Advantage Ag Strategies, Ltd., urges farmers to look at soybean price protection right now.
"With a large carryout expected, tight storage at harvest, new-crop soybeans should be covered. So, selling the soybeans and carrying corn may be a good marketing position," Mortensen said.
Mortensen added, "Unless there is a real problem with the growing season in August, I just don't see the outlook for the bean market to be very positive. We might get better basis or a bump with weather yet this summer. However, the big picture is that we have a strong potential for a big carryout."
For the corn picture, Mortensen said there are two worlds to consider, the 2006 crop and the 2007 crop.
"The 2006 crop is going to go to the bin this fall and the prospects for marketing that crop already in the bin are not very good and haven't been that good," Mortensen said. "The basis has been wide and there isn't much of a play."
For farmers who don't get new-crop corn sold, there may be a salvation with demand.
"Ethanol usage, and a better export market next year may bale the farmer out. If we get a 12.0 billion bushel corn crop, then we would have a problem," Mortensen said.
Dr. Bill Tierney, executive vice-president with John Stewart & Associates, sees an early low for corn this year.
A typical low shows up at harvest time, due to harvest pressure, he says.
"We believe since the market sees the crop good enough to achieve trendline yields or above, we see the recent 15 percent decline in the corn market continuing. And a market low could be seen in the next 30-45 days," Tierney said.
Tierney sees the downside risk for the Dec. CBOT futures contract between $0.15-$0.25. As of mid-day Tuesday, the Dec. CBOT futures contract was trading at $2.50 per bushel.
"I'm sure most farmers have already priced most of their 2006 crop, so they might not see this as much of a downside risk," Tierney said.
"However, if USDA releases a much larger than expected corn acreage figure in Friday's report, or yields far exceed trend, then a sub-$2.00 per bushel Dec. futures price is possible. That's not the projection we are putting out, but it's possible."