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Upside Seen for the 2018 Corn Market
The recent pullback of near 15¢ in corn futures, 30¢ in soybeans, and 20¢ in wheat could be viewed as the start of two different paths.
On the one hand, the potential that prices may have peaked and are on their way down would be more in line with the somewhat bearish mind-set the grain markets have exhibited over the last several years. This has been due to large world inventories, as excellent crops with little or no negative weather events have impacted yield. Yet, there is a different feel to the markets this year. Supply, while burdensome in wheat, is becoming less burdensome in corn and soybeans, which suggests increasing price volatility with an upward price bias.
By some measurements, commodities as a whole have been on the rebound since bottoming in January 2016. Price setbacks in most markets have proven to be opportunities for buyers. Managed (speculative) money in the corn market has exceeded both 2015 and 2016 for the number of contracts traded.
From a historical perspective, the corn and soybean markets have projected carryouts that are large, if not burdensome. Yet, after four years of low prices, these carryout numbers, when divided by usage, have a different look and feel. What we see is that multiple years of big crops and low prices have produced steadily increasing demand. This may be particularly true in corn; in 2018 it is expected that the world will consume more corn than it will produce. Rallies over the last two years have occurred, yet were short-lived. Farmers are poised to sell aggressively this year.
While not predicting a drought or significant change in price, you want to be ready. End users could be wise to buy grain and feed while it’s cheap. What is cheap? We define cheap as near or below the cost of production. From a producer perspective, be prepared to sell when prices rally, and have these positions covered with call options. With call options in place, you will not be stressed that you sold too much too soon, should a price rally occur. Buy puts on grain you do not intend to forward sell. The lesson learned in recent years is that when a rally ends, it can end quickly. Preplan for summer weather to dictate price movement. Prepare yourself for any price direction.
If you have questions or comments, contact Top Farmer at 1-800-TOP-FARM, ext 129.
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.
Carol Tillmann Front Desk Administrative Assistant | Stewart-Peterson Office: 800.334.9779 | Fax: 262.334.6225 firstname.lastname@example.org
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.