Content ID

49670

Is All This Corn Bearishness Warranted?

There's no shortage of analysts, farmers, or speculators who are outright bearish corn. As they look ahead to 2015, assuming a generally normal crop, this means excess inventory and a decline in prices by fall. That's conventional wisdom and in the end could probably be more right than wrong. History has a long track record of farmers producing good crops. The crowd is bearish and, so far, prices have failed to muster anything more than a sideways pattern.

However, it's very early in the growing season. With corn priced at or below the cost of production, there doesn't appear to be a strong incentive for farmers to either plant more acres or spend excess dollars trying to produce high-end yields. Both are factors that could loom large if weather is less than ideal. In addition, carryout has been slowly grinding lower over the last four months. Demand is holding strong at current price levels. Our point is that the crowd is bearish (and sometimes the crowd is wrong). This would imply corn prices could rally when most are not expecting this to happen.

What if weather is a factor? What if the dry weather in the western Corn Belt and Panhandle region permeates into the Midwest? What if temperatures soar into midsummer? If these weather events were to occur, significant short-covering and establishment of long positions could send prices higher. In 2012, prices bottomed in June when the crop went in early and dry conditions allowed for rapid fieldwork. However, when temperatures soared and rain amounts diminished, prices rallied to record highs by August. Bears were in charge and the sentiment was negative, but when weather became the dominant factor, the "crowd" was caught on the wrong side of the market.

In order to leverage this kind of a move, one can look at call options with a quantified risk. An even more leveraged position is selling an at-the-money call and buying three or four out-of-the-money calls in what is termed a ratio call spread. If futures are at or below the sold call strike price at expiration, you can expect to risk close to the same amount of money as you would if you purchased an at-the-money call. If prices rally sharply due to weather, you are well positioned.

In the end, only time will tell what this year’s crop will be. For now, it appears there is no shortage of market participants who believe in strong production and increasing supplies. Yet, markets are always in flux. Weather is the biggest factor determining price. Should prices drop significantly, or rally sharply, the real question is, are you prepared? Now is the time to strategize and plan. Ignore the crowd and follow your instinct. Construct a strategy that has you ready to handle the market, whichever way it may go.


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Published: 3/27/2015
Over the past couple weeks, the wheat market had emerged (pun intended) as the upside leader in the grain and soy markets with spot futures gaining (growing) nearly 60 cents from the lows posted during the first week of this month. Everything I have outlined above reinforces the belief that the ...

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Published: 3/25/2015
I did finally wrap up the process before New Years. However, the time I invested detracted from time I should have spent promoting marketing workshops. To do this , I look at a comparison of the November soybean futures price each year for 20 years on May 1. A quick scan of the data from each year 1995 through 2014 showed that in 12 of those years the soybean futures price was higher on May 1 than on October 1.

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Published: 3/27/2015
At 7:30am: Early calls: Corn 1-2 cents lower, soybeans 1-2 cents lower, and wheat 2-4 cents higher. Trackers: Overnight grain, soybean markets = Trading mostly higher. Wall Street = Seen flat, eyes are on Yellen and the 4th Quarter GDP. World Markets = Europe stocks were mixed, Asia/Pacific stocks were mostly lower.

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Published: 3/23/2015
The USDA's estimate of December 1, 2014 stocks of U.S. Based on the estimated size of the 2014 crop and estimates of exports and domestic crush during the previous quarter, the stocks estimate implied a record large residual use of soybeans during the first quarter (September-November) of the 2014-15 marketing year.

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Published: 3/24/2015
reminds me of the killer that just won't die in a slasher movie, ja. Each time you think he is dead, he pops back up and kills someone else... The killer's first commodity victim was Mr. Oil... then Mr. John Deere "jobs" He's a serial-

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Published: 3/25/2015
What are crop prices going to look like over the next 5 years. Prices over that period make a difference because if the season average price remains below the reference price, the PLC will likely provide farmers with higher government payments than ARC over the tenure of the farm bill. During the 1916-1919 period, US corn prices averaged $1.35 per bushel, a price not seen again until 1946.

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Published: 3/27/2015
Good morning Overnight corn down 1, beans down 2 and wheat is king....up 1. Stocks will try and break a four day losing streak and are looking to try and avoid a down quarter for the first time in 6 years. Today stocks are a little easier with the S & P down 2 points in early trade. Oil is lower after yesterday's rocket shot. Today oil sits at $50.69 down .74 cents.

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Published: 3/26/2015
so tell me this then if beans really do tank (and I am in the camp that certainly sees it as a possibility) then how do you navigate a basis positive area in the midst of a large crop knowing no matter how many acres are planted in 2015 your area will probably grow less beans because 2014 was soooo good thus basis could rip higher since its already very attrative in the midst of a big crop.

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Published: 3/25/2015
Luis Vieira, Brazil freelance writer for Agriculture.com, has found out that the weakening economy may drop Mato Grosso's soybean acreage for the first time in years. Brazilian Farmers Face Economic Woes in 2016 What will this mean for the markets, longterm? Mike

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Published: 3/24/2015
With banks and consultancies predicting a GDP contraction in Brazil from -0.5% to -2%, this would be the most severe crisis in the South American country in the last 25 years after a 2014 marked by zero growth. At a traditional farm show recently in Rio Grande do Sul, Agriculture and Livestock minister, Katia Abreu, confirmed a consequence of the crisis that many Brazilian farmers had expected.

If you have questions or comments, or would like help implementing strategy for the year ahead or desire materials that you can read to learn more about marketing, please contact Bryan Doherty at 1-800-TOP-FARM ext. 129.

These strategies may not be for everyone. In any strategy, consider commission costs on transactions, and make sure you understand the ramifications whenever you are in any market position.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Stewart-Peterson and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Stewart-Peterson. Stewart-Peterson refers to Stewart-Peterson Group Inc. and Stewart-Peterson Inc. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with both companies. Accordingly this email is sent on behalf of the company or companies providing the services discussed in the email.

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