Corn has backpedaled to fresh new six-month lows as bulls continue to talk about better-than-expected U.S. export demand and problematic planting weather. The primary concerns for the bulls continue to be conditions being too wet out east and to the south.
The other concern the bulls are talking a bit more about is the fact corn that has already been planted in portions of Midwest continues to sit in soil that some consider too cold. From everything I know or have been told through the years, it generally takes sustained temps of around 20 degrees F before you start hearing more serious talk or potential for corn seedling death prior to emergence. Therefore I personally don't see this being any type of major wide spread concern.
The bears on the other hand continue to believe a majority of the crop will end up getting planted in a timely fashion and have little impact on longer-term price. The bears are also a bit concerned about demand, particularly the fact that the current USDA ethanol and feed demand estimates might be a bit too high. Data from the International Grains Council seemed mixed this week. The group upped their estimate for 2015-16 world corn production by 10 million metric tons, primarily on better production out of China and Mexico. Keep in mind this is still some 43 million metric tons lower than last years record global corn production estimate. Also keep in mind, even though global corn ending stocks are burdensome, they are approximately 17 million metric tons lower than last year (198 MMTs in 2014-15 vs. and estimate of 181 MMTs in 2015-16).
I'm not getting bulled up just yet, but with the right U.S. weather story there is certainly some room to the upside. As a producer, I am staying patient. From a spec perspective, picking up small doses of cheap calls on the additional planting breaks makes some sense. I have to imagine if we end up down around $3.50 going into the actual "growing season" the risk-to-reward clearly shifts to the upside.