Home / Markets / Markets Analysis / Corn market / Connecting the dots

Connecting the dots

Agriculture.com Staff 05/11/2007 @ 11:29am

The corn market is at a critical crossroads. In essence, it has a quandary to deal with.

Last fall, when December 2007 prices pushed through $3.50 on their way to well over $4.00, the media and traders touted that inventories would be much too tight in the years ahead to meet increased usage. Now since topping in February, prices have dropped off 50% of their rally and are at a critical point. The trade has lost its bullish luster but, the question is, is it temporary or long term?

After peaking in February, the best case scenario for demand to stay intact was a price setback. The market has witnessed a decline enough to keep the ethanol, export and feed demand markets strong for the next two to three years. The question is, once again, whether this year's crop can meet needs. Though it is only early May and the chances for a large crop are still high, we cannot help but think that, when you connect the dots from this spring's weather adversities, it may be difficult to produce the type of yields that have existed the last three years.

Specifically, an early freeze, cold ground temperatures deep into late April, excessive flooding in areas and, in some cases, a less than desirable stand count all add up to the possibility that this year's crop will not produce record-type results. In fact, if you are a student of history and believe in the law of averages, it is likely that, after three big yielding crops in a row, harvest results could be down some time in the future, perhaps this year.

Bottom line, the market setback has created a bullish demand scenario. An uncertain spring and the possibility that much of the crop could be somewhat shallow rooted, due to excess spring moisture, suggests a hot, dry stretch this summer could rapidly rally prices. Target points are the highs established in February and then the $5.50 level established in 1996, another dot to be connected.

If you have any questions or comments, please contact Top Farmer at 1-800-TOP-FARM, ext. 129.

The corn market is at a critical crossroads. In essence, it has a quandary to deal with.

CancelPost Comment
MORE FROM AGRICULTURE.COM STAFF more +

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Holiday Profit Taking Pressures Markets