A troll for an enduser? Go back through history and look at weather markets past. Take a close look at the futures market in 1988, 2002, 2008, and 2011. See where those futures prices topped out, and then see what they did after. This is definitely a weather market. In all of those years mentioned, the futures peaked somewhere between June-August. By not taking advantage of prices until after harvest, one would have missed good prices. It adds insult to injury to harvest a poor crop and get a poor price to boot. Never once did I recommend making sales when we were below the 5.68 spring insurance price. In fact, I flexed hedges below there to pick up some to add to me hedges.
I see problems ahead. The biggest problem facing corn prices is falling crude price with rising corn price. I'm not sure how well 7 dollar corn works with 60 dollar crude which is where a lot of economists see if falling to this fall/winter. Considering ethanol is the biggest user of corn, it is something that definitely needs monitoring. The next largest corn user if for feed. Cattle make up a large percentage of the feed usage number. The drought is doing nothing more than cutting the cow numbers. Last year, a lot of the southern cows got relocated. This year, those cows will be slaughtered because a lot larger area is being affected by the drought. We're witnessing one of the largest spreads in history between choice and select beef. This is because feedlots are moving out smaller carcasses, thus feeding less corn because of the heat. It's better to move an 1100 pound steer and take a price hit than to have several 1300+ steers die in the heat. Exports don't make up a huge percentage of the corn crop, but they do make up a percentage nonetheless. The dollar is over ten percent higher than it was a year ago. Our new crop corn sales thus far have been poor mostly due to Brazil having better prices. QE3 is months away because Helicopter Ben isn't stupid. Implementing it now all but assures a Romney presidency which spells the end of a Bernanke run Fed.
There's a time to be bullish which was around the 5.00-5.25 mark on new crop futures, and there's a time to be bearish which seems to me to be around 6.50 new crop futures. It reminds me of earlier this spring when live cattle were at 1.30, but very few people hedged because we were going to 1.40. Everything is most bullish at the top and most bearish at the bottom which is also why so little corn was protected by endusers when we were below 5.25 just a few short weeks ago. I wonder how much farm diesel was bought when crude was over 100 bucks? I'd be willing to bet more than what was bought last fall.
