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How High Will Corn Go?

While local cash markets for corn have been lackluster due to the ample fall harvest, and some producers in western Iowa are reporting basis close to 60¢ under the futures price, something sneaky has been happening with corn futures: They’ve been trending higher. What does this mean, and what does the future hold for producers still dealing with last year’s harvest conundrum?

This past October U.S. producers were harvesting a monster crop, and some producer clients told me they had no room in the bin. They had to sell their overflow at harvest. This was understandable. Mindful that prices were really cheap, I advised to re-own those bushels on the Board. In fact, producers have again sold more cash on this recent price rally because they were in need of cash flow. And again, I am still encouraging producers to re-own those bushels on the board in some fashion (futures or options depending on risk tolerance).

Historically, now until June is when corn futures rally. So far history seems to be repeating itself. Why is the market rallying, and how high could it go?

  1. The market is aware that we will potentially plant 4 million fewer acres of corn. If that comes to fruition, then ending stocks already are perceived as getting smaller. Remember, all it takes is PERCEPTION of a market factor to make the price move. So, the market essentially is pricing in less overall production.
  2. The funds are now net long in corn. They are actually almost net long 100,000 contracts (as of this writing) and the past two years, by or during the month of June, they accumulated a net long position of nearly 250,000 contracts! There is still room for them to be buyers in this market.
  3. Corn demand is strong; THANK YOU to all of those groups out there (U.S Grains Council, national and various state corn growers’ associations) who help spur our U.S. corn export demand! Our exports are up substantially, and that’s even with a higher U.S. dollar. Feed demand is strong. Corn for ethanol demand is strong. It’s a friendly story! 
  4. How high can it go? When looking at a continuous front-month, monthly corn futures chart, there is SUBSTANTIAL resistance at the $4.43 level. That was resistance for the past two years, and is definitely a strong target for FUTURES prices (keep in mind your cash market may not achieve those levels due to wide basis in some locations). In fact, according to statistical and historical research we’ve done at Stewart-Peterson, our analyst team is suggesting corn futures have 69% odds that front-month futures hit $4.50 before the end of 2017.

That’s good news! If you’ve been holding old crop wondering when to sell, we believe there is potential! Have your orders ready to go with your elevator, and be ready to pull the trigger. History is on your side. Be prepared to sell, and watch the corn market rally throughout the next couple months. The longer and slower a rally occurs, you can bet your booty that the crashing fall will come fast and furious!

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com.

 

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2017 Stewart-Peterson Inc. All rights reserved.

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