Corn bulls are excited about the tighter than expected Dec. 1 stocks number posted by the USDA on Friday. There was also some excitement about the better-than-expected corn feed usage numbers. All of this seems to be creating a tale of two worlds: the old crop looking tighter and tighter and the anticipation of a more burdensome new crop.
I suspect "IF" ethanol production or U.S. exports (which the USDA now has penciled in at 43-year lows) start to pick up momentum it will only exasperate the situation. Simply stated the end-users might remain on the defensive for some time. Producers with old-crop supplies should continue to hold a while longer to see how things shake out. I suspect there is more quality corn being stored on farms in Ohio, Michigan, North Dakota, South Dakota and Wisconsin (areas that had better rains) than in other parts of the country. With this in mind producers outside these areas may continue to see the basis improve as quality bushels become more and more scarce.
New-crop corn is obviously a bird of a different color as the trade continues to talk about a so-called "glut of supply" around the next corner. Sorry, I am just not 100% sold on that philosophy as of yet. Yes, I understand U.S. producers could throw 96-100 million acres in the ground, but the quality of the soil has to be in question. Keep in mind last year at this time new-crop corn prices where actually trading at or above our current levels, while we are sitting on much drier and poor planting conditions today. My point is to assume trend-line type yields at this stage of the game seems somewhat ludicrous. I can concur with protecting a portion of your downside risk, on fear of improving soil moisture levels, but to sell 100% seems extreme from my perspective. It is simply too early to assume the weather is going to cooperate. Also keep in mind we have the "Spring Insurance" guarantee around the next corner, which last year insured $5.68/bu. Therefore no real reason to get carried away just yet. As I have aged, I have learned moderation in life is often the key...
Personally, I will NOT be chasing the rally. In fact I advise producers who need to get caught up on new-crop sales to take full-advantage of any move to higher ground. Old-crop supplies are a different story, and significant downside risk seems to remain somewhat limited. Longer term, I continue to be concerned about overall money flowing into the commodity markets. For More details on what you can speciffically do with your bushels Click here now and fill out the basic information and I will send it right out to you. Have a great day.