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Closing Corn Commentary

Fundamental Support: Today a profit taking bounce could have been expected ahead of the weekend. Instead of seeing that bounce on the opening, it appears that speculators wanted to have a half day more of selling first. A bright spot seen today was that December dropped down to 600 support which held its first test. Lately there has been a popular question being asked, which is, “Who else can buyers buy from other than the US?” Actually, if you look at the production numbers for us and the rest of the world you might say the answer is “more alternative sources than ever”. Since 2005/06 the US corn production has increased 10.8%. Meanwhile the rest of the world has increased 30.9%! This is part of the problem with our exports recently. Yes, the world always needs to eat but at the same time the world has more choices where to buy from than ever. If other sources are offering corn cheaper than the US than that’s where our demand gets hurt. Looking back, this is just what the USDA said would happen on its last report. For the last two weeks they are looking smart but there is still a long way to go. When it is all said and done this corn needs to continue adjusting price until more exports are found. It is quite possible breaking 630 is all we need but we still need to wait until Friday to find out. Bears have to feel that each morning no new exports are announced, they have the green light to continue selling. Bulls will defend the 600 level and can always point to the fact that last time corn was this low we found a major sale to China. Funds are the wild card but breaking 600 could be another level where they kick in more selling.


Available Supplies: Even with a second year of lower US production, total world supplies will hit a new record this year…Rich Nelson

Trade recommendation:

(11/18) Sell December corn 599 stop, risk 615, objective 575.


USDA computed October’s feedlot placements at 0.6% less than last year. This was about on the average guess. The good news is the massive flow of young calves from the Southern Plains is now slowing. In September, this category of placements was 34% larger than last year. Here in October, they were only 11% larger. This marks a turning point in the cattle supply. From here on out, the deficit in medium and heavyweight feeders should overshadow the larger numbers from the South. Our modeled supply flow of finished cattle supplies is on track. Cattle slaughter will be about equal with last year through the first quarter than a good supply decline will be seen through the remainder of 2012. For the short term, news that packers have cut the kill for two weeks in a row brok cash cattle by $2. Also, it appears the WTO has sided with Canada and Mexico in their case against our Country of Origin Labeling. This may eventually increase live animal imports into the US slightly. Our target for December futures to hit $119 is close to being filled.

Working Trade:

(09/07) Sold 2 April 118 puts 2.57 each, risk to 3.00, objective 0. Closed 1.82.

(11/11) Sold December 125 call 1.15, risk to 1.80, objective 0. Closed .20.

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