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Farmers sell into corn rally

Agriculture.com Staff 02/09/2016 @ 7:52am

With corn prices on the Chicago Board of Trade futures market rallying the past few weeks, producer selling has been extremely heavy, analysts said.

For farmers selling new-crop corn during the recent rally, the CBOT’s Dec. '06 futures contract hovered around $2.60 per bushel.

On Tuesday, Dec. '06 corn futures traded lower at $2.54 ½ per bushel, Dec. '07 was trading at $2.64 ½, and Dec. '08 at $2.68.

Farmers should be selling something into all three years of the Dec. CBOT contracts, John Roach, Roach Ag Marketing Ltd, wrote in his daily market commentary.

"What I'm telling customers is to sell the bushels they can't store or the amount they want to forward sell. We split this amount into fours and market that amount into this rally," Roach said.

Roach added, " Make sure that you have sold enough grain to cover your cash flow needs until mid-March."

Rich Balvanz, Ag Management Services, LLC, said he's not surprised of the farmer selling activity. "With very little corn under loan, the corn being sold is all free stocks, there's no government protection for virtually the entire crop, so each time we rally this market farmers are selling into it," Balvanz said.

With producers selling, this makes the basis less important when farmers are willing to price ahead and sell at these flat prices that show good carry in the market, Balvanz said. "If the fund investing continues as it has, big carries are expected to remain in the market. That will provide excellent marketing opportunities for a long time to come," Balvanz said.

The corn market has not had a tightening in supplies yet the speculative buying has been massive enough to take prices higher anyway, Roach said. The recent corn fund buying spree was the third largest in history. The previous two instances occurred in the summer of 2002 when we had a legitimate crop scare (yields were 7 % below trend); and the second was in spring 2004 when the market's new crop ending stocks estimate was well below 1 billion bushels, according to Roach's daily market commentary.

When asked how much farmers are selling into the Dec. futures market rally, Balvanz said at one time during the rally farmers were very receptive. What's happening now is farmers are trying to figure out if they will have a corn crop to sell in that market. "Farmers are selling, but they are pushing the pencil harder than ever trying to figure input costs for corn. So, I just don't think they want to get sold too heavily at or above $2.50 per bushel Dec. futures when that is barely a breakeven for corn this year. If we have yield problems, that probably would not be breakeven."

With corn prices on the Chicago Board of Trade futures market rallying the past few weeks, producer selling has been extremely heavy, analysts said.

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