You are here
A corn price bottom?
Have corn prices hit a bottom? It seems awfully early for corn prices to hit
a bottom, especially if its true that we have a record large corn crop in the
field waiting to be harvested. That seems to be the consensus as we await
tomorrows October USDA report, and yet corn prices have rallied 30c this week in
a strong performance ahead of the report.
Technically, corn looks like it has completed a bottom with higher highs and
higher lows now formed technically. There also have been a number of upside
daily reversals formed on charts, and basis is unusually strong for this time of
year (harvest time). Buyers of corn are having a hard time initiating corn for
processing and feed use, and it shows in the strong basis currently offered in
many locations. We've completed a nice round bottom which started in July, and
has held the lows now for nearly 3 months. The charts are saying, "Corn has
bottomed, and is heading higher."
Fundamentally, corn has problems in the country, with late development almost
everywhere, and harvest delayed because of that and very wet conditions across
the entire corn belt (currently and forecast in the coming weeks). This causing
harvest delays and potential for harvest losses as corn tips over under the
weight of the heavy ear in soggy soils. We also have some very cold weather
which is likely to kill growing corn plants prematurely before they have the
chance to mature. Surely this is supportive as well. And outside markets have
been supportive, with a weaker dollar and soaring precious metals that should
mean commodity inflation is present in other commodities, too, including corn.
So we are starting to see signs that the corn market should have bottomed. The
only problem with that scanario is the 13 billion+ bushel corn crop waiting to
be harvested. Estimates range from 160-168 bu/acre corn yield for this year,
and new record or near record large yield for the US. This one fundamental is a
stubborn one, one that won't go away anytime soon. One that means as we
progress in this harvest, its likely that we will see further pressure on corn
prices as farmers are forced to make harvest sales of a crop which is likely to
fill up storages. What do you do with excess corn after storages are full???
Some of that excess corn is likely to come to market (even though there is a
hefty carry in the market).
How can we reconcile the above 2 scenarios, one where it all looks bullish, and
the other where we have a massive corn crop right in front of harvest?
A potential double bottom at the $3 area could be the answer. We may not go
lower than the $3 area, but we certainly can go back down and test those recent
lows. Before this recent strength, it seemed likely that corn could do down
much lower than $3, especially if the 168 bu yield Informa keeps talking about
is right. But a soaring metals market, a sagging dollar, and a strong stock
market might mean a world economic recovery is right around the corner, and
demand for corn might be stronger than we all anticipated. So somewhere in
between the "Doom and Gloom" price prospects and the "Pie in the sky" price
prospects might be right. In a double bottom at $3, everyone can be right (or
equally wrong), depending upon your perspecitive. Timing is everything, though,
as becoming bullish at $3.60 futures if we are going back down to test lower
levels will be a huge mistake. Maybe as big a mistake as becoming bearish at $3
It seems like when you become confident in a market (as bulls are becoming),
instead one needs to be afraid. And when one is afraid of a market (as bears
are becoming), one needs to be confident. The difficulty is doing this at the
right times - another psychology factor so necessary to trade successfully in
today's choppy market!
The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be reliable. The
opinions and recommendations contained are based on our judgement and do not
guarantee profits will be achieved or that losses will not be incurred.
Recommendations should not be construed as an offer to buy or sell
commodities. There is substantial risk of loss in trading futures and
options on futures.
Ray Grabanski is President of Progressive Ag, a marketing and risk
management firm for farmers located in Fargo, ND. For questions or
comments, or if you are interested in more information about Progressive Ag's
common sense marketing services, call 1-800-450-1404 or email
Have corn prices hit a bottom? It seems awfully early for corn prices to hit a bottom, especially if its true that we have a record large corn crop in the field waiting to be harvested. That seems to be the consensus as we await tomorrows October USDA report, and yet corn prices have rallied 30c this week in a strong performance ahead of the report.