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Corn market finds floor, analysts say

Agriculture.com Staff 02/11/2016 @ 9:41pm

The July corn futures contract dropped $0.38 from Sunday to Wednesday, leaving some analysts wondering if a floor for the corn market can be found.

Despite heavy rains and flooding causing planting delays in the western Corn Belt, an improved USDA planting progress report on Monday has the market in a downward trend.

Don Roose, U.S. Commodities, West Des Moines, Iowa, said a five-week trading range with the Chicago Board of Trade July corn contract is $3.60-$4.00.

"We've gone over some and under some, but that's really where we are right now," Roose said. "When you look at the flooding that's out there, and the reduced yield that could go with it, I think we are at the bottom of this corn market. I see this market extracting lower or bounce back up."

Roose added, "Keep in mind this has been the type of corn market that races to the top and then goes down. It checks the lows and then runs back up. It's a high energy, fast market." Roose said the best way for producers to handle marketing decisions in this lower market is to buy puts under the market. "If the market jumps up, buy some calls above it."

John Roach, Roach Ag Marketing, Ltd, said the most aggressive way to participate in a down trend is to be short in futures or cash contracts. "A less aggressive strategy is to use the puts,” Roach wrote in a daily newsletter. "With the uncertainty of the supply, I like being less aggressive rather than more aggressive right now,” he said “Remember I am long-term bullish corn. We need a monster plus crop next year."

Roy Huckabay, Linn Group executive vice president, said the market has yet to digest the floodwater problems. Plus, too much attention is being put on old bearish fundamentals.

This week, some analysts have released 2006-2007 corn carryout estimates for Friday's USDA Supply/Demand report as high as 1.2 billion bushels.

"There's talk the market is bearish because of the estimates, but we've known these numbers for three months, why all of the sudden is the market digesting this old news," Huckabay said.

USDA will release the supply/demand report on Friday at 7:30 AM CST.

Huckabay said the market will begin to focus on the reality of the flooding, creating an upward trend.

"Anybody with any salt looks around and says we are not having such a good spring. We have flooding all around, delayed planting, reduced corn seed populations. I think all of this is kind of important," Huckabay said.

If the market drops under $3.60 on the Dec. contract, coming out of short hedges would be recommended, because the chances of this crop running into adverse growing conditions this summer are too good, Huckabay said.

"I see no reason to buy the market back on stuff that has been sold," Huckabay said. "I would be ready to put my short hedges back on when a rally hits."

The July corn futures contract dropped $0.38 from Sunday to Wednesday, leaving some analysts wondering if a floor for the corn market can be found.

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