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Frequent Contributor
ChaseOrstad
Posts: 82
Registered: ‎06-05-2013
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How much lower can we go? Better yet, When will the lows occur?

Corn price have somewhat stabilized around the $4.40 area in the DEC13 contract after losing more than $1.30 per bushel since mid-June. 

 

crystal_ball_in_corn_field_by_april_mo-d5f0wa9.jpg

Producers continue to ask how much lower can we go? My thoughts are there could eventually be another $0.60 to $0.70 cents of downside, meaning a $3.70 to $3.80 price tag could eventually be placed on new-crop corn. Remember, just as the funds tend to overdue things to the upside the same can be true to the downside.

 

A better question might be when will the lows occur? From where I sit today, the lows might not occur until 2014. My thoughts are the overall corn yield will grow to some degree, but not as much as some are projecting. I doubt a 160-plus yield number is in the cards (maybe but I doubt it). Keep in mind there was a ton of corn planted in late-May and early-June that still needs to be harvested. The big "corn-on-corn" producers who didn't get much rain during Jun/Jul/Aug are simply NOT going to be harvesting big yields on these acres. Keep in mind we are still yet to see are 1-2 million reduction in "harvested acres." Basically meaning while the crop may still be getting bigger, I am not sold on the fact it is going to grow significantly. This means the trade could pressure prices a little lower near-term on thoughts of a bigger US crop, but probably NOT significantly lower.  My guess is that we start to find more stable ground down around the $4.10 to $4.20 area. From here I think the sell paper dries up to some extent as the "risk-to-reward" ratio for the big players becomes less-attractive. Point being there won't necessarily be new longs jumping in the corn market but rather more shorts banking profits and exiting. 

 

open cab combine.jpg

 

At the same time I am thinking US producers who have made limited sales will be apprehensive to move cash bushels at this low-end of the range, also preferring to wait until 2014 for tax purposes. That may give the market a little bullish bounce as the bears stop to catch their breath and the trade could perhaps be digesting some type of South American weather headline. I think the trade will want to see how the South American weather plays out before they hammer the bottom out of this thing. 

 

That puts us out into late-Jan or early-Feb, the exact time period when US crop insurance prices start to be determined. Keep in mind this is also when the USDA throws out their new-crop 2014 production estimates, which we know from past experience generally starts out with trend-line yield estimates. Meaning even if harvested acres fall back to 85-million, a beginning yield estimate of 165-bushels per acre, still generates a mammoth 14 billion bushel plus crop. Throw this on top of what many are calling a 2.1 to 2.2 billion bushel carry from this year, and you have a time period when the market will look to put its final nail in the coffin... i.e. The bins of many US producers are full from the 2013 harvest, and they are looking to aggressively make more sales. The South American crop looks to be in the clear and weather premium is being taken out of the market rather than being put in. The 2014 US crop is being projected on "paper" to once again be massive. All bearish tones!!!

 

Make sure you understand, this is assuming we live in a "bubble"... which we don't. This is assuming no wars, no major weather hiccups, no Chinese surprises, etc. I know this is hard to imagine, but it is a possibility. As always, continue to prepare your operation for the worst and hope for the best! I think as producers you have to continue to keep your hedges in place and NOT start looking for re-ownership until something more drastically changes. 

 

Courtesy of the Van Trump Report!

Senior Contributor
Slim123
Posts: 191
Registered: ‎01-20-2012

Re: How much lower can we go? Better yet, When will the lows occur?

I thought I had a small grain cart. 

Esteemed Advisor
sw363535
Posts: 4,245
Registered: ‎07-18-2011
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Re: How much lower can we go? Better yet, When will the lows occur?

slim123,

 

Am I seeing visions or is that a cleverly converted manure spreader??

sw
Advisor
Red Steele
Posts: 4,151
Registered: ‎05-13-2010
0

Re: How much lower can we go? Better yet, When will the lows occur?

Looks like a model 91 IH combine , with levers for steering control.

 

My father bought one of those in the late 60's or early 70's to take out his soybeans when his regular custom operator wasn't able to come or wouldn't come due to the wet harvest. It was still working great when Dad traded it for a MF 300 with a cab and a steering wheel.

 

Long way from there to my new NH combine with a chopping head.

"Peace on earth would mean the end of civilization as we know it" Joseph Heller
Senior Advisor
kraft-t
Posts: 10,718
Registered: ‎05-10-2010
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Re: That last picture with the blanket lined wagon box

Anyone want to bet that the crop being harvested is flax. Many many years ago my uncle  raised fax  and I was hardly old enough to pay attention. Anyway, holding flax in a farm wagon was similar to holding water. The smallest of cracks will allow leakage.

 

Another factor. If your windrow was a bit too much for your combine or a bit too tough, stopping the ground speed woukld notstop the windrow from going in. You would stop but the windrow was entangled and the combine would pull in additional windrow until it plugged. There was no such thing as a header shutoff in those days.

Senior Contributor
pritchh
Posts: 495
Registered: ‎10-18-2010
0

Re: How much lower can we go? Better yet, When will the lows occur?

Not trying to pic on you but find myself compelled to comment, “am thinking US producers who have made limited sales will be apprehensive to move cash bushels at this low-end of the range, also preferring to wait until 2014 for tax purposes. ‘That may give the market a little bullish bounce “.  {Why I ask, ,,, you have singled out one small slice of producers and one small variable of many and something that is no different this year than any other- how is this even a market factor? ALT, one could say in bear markets, there are bounces. ]

 

Senior Contributor
pritchh
Posts: 495
Registered: ‎10-18-2010
0

Re: How much lower can we go? Better yet, When will the lows occur? trade does not trade

“”the trade could perhaps be digesting some type of South American weather headlines.” [Everyone watches SA weather not exclusive to the trade, And there may be no SA weather headlines or they may be “SA weather going well”, is that what you meant?] “I think the trade will want to see how the South American weather plays out before they hammer the bottom out of this thing.” { endusers scale in coverage by time and price. If corn keeps falling they will on average extend coverage, go longer. The owning trade, takes what comes there way and hedges, there is very little market forecasting involved. Blaming the the trade for everything is a terrible cop-out in my opinion- its Victimhood, “ I am a lil produces and those big buys outsmarted me” v.s. working on being a better marketer]

 

BIGGIE, Show Me Missouri” attitudes preclude success in markets. Just whi us the trade goin to sell to to when the see a good SA crop, the guy who doesn’t know? Smart market participation means not knowing anything for sure and scaling in positions to cover liabilities. Frank Purdue the 3rd has a market view but doesn’t “know” so he is either 3 months forward or 6, they are not “market” players. The “trade” is largely hedged, why their nbanks finance them. Not so common misnomer. Processors process, end-users feed, large storage merchants, store.  USDA starst at trendyied of course. ates. “”” You don’t need experience, intuitive, the USDA by nature is as scientific as able and of course starts with trendyield.  Each to his own but your method seems to be congering up images of “the trade doing this” or a SA headline or, with conclusions of “beans , the only bull left”, any of which is guesses along with 40 other variables that can arrive. It may give mental comfort but in my opinion becomes less useful in assessing markets and the range of possible outcomes.

 

Hope it is Ok to thrash out philosophical ideas here, not just market opinions.