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Senior Contributor

Update On Price Targets

As you probably know, after yesterday's USDA report, I opined that I think the upside targets for corn going forward are the $3.77 to $3.85 area, and the the mid-$3.90's if we get through the first obstacle. I also have said that there's an outside chance that we could trade slightly above $4 under the right conditions. 

 

I am still holding to that, but I want to add that once we get the present harvest put to bed, and the March futures contract becomes the next delivery month, there is a better than fair chance that we will see that contract trade up to slightly over $4. There is a technical price pattern that goes back several years that requires a trade to the just-over $4 level in early 2019 to complete, and that very well could happen in the first quarter of 2019.

 

However, if it happens, not only should you sell everything you can there, but also put the farm for sale. Because if that level holds as resistance and the price starts falling from there, its going to get nasty as the big funds notice what is happening. The ensuing sell off then will take us down into the mid-$2 area sometime in 2019 or 2020. 

 

So the trade in the first quarter of 2019 is to sell hard if the March contract gets to $4, and risk about ten cents on the trade. If the trade is correct, we should not exceed the high price registered earlier this year at $4.1225...in fact, if the front contract ever settles again above that $4.1225 level, we have to then start talking about a reversal to a bullish trend for the next few years thereafter.

 

Anyway, something to keep in mind for the beginning of next year. 

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Senior Contributor

Re: Update On Price Targets

Sell the farm? Don't think so Ray. We have options, selling 3 years out. Loading up on puts. RA insurance. You don't get in and out of this business on a whim.
So do I sell farm before or after I put the stop in on corn. Not so easy is it?
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Senior Contributor

Re: Update On Price Targets

Calm down, it was a play on words, hyperbole to make the point that the sell target just over $4 is an excellent place to put on an outright short and not just a hedge. There are two idiomatic phrases often heard, "sell the farm" and "sell the ranch". I was using one of them to make the point since this is a farming website.

 

You need to unwind and enjoy life a bit. Hard to see the humor in writing if you're wound up like a top. Be calm and carry on, laughter is the best medicine after chicken soup.

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Senior Contributor

Re: Update On Price Targets

I'm good thanks. Should be a nice close out to the week.
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Senior Contributor

Re: Update On Price Targets

The important element now is the market has to start bringing new participants in. Yesterday there was volume in corn of 414,000, yet Open Interest grew by only 4000 contracts. That ratio has to start picking up to have the fuel to power any rally from here. The market seems to have a strong and steady, albeit patient bid to it today. Perhaps the calm before the storm. Hard to get substantial rallies in commodities when there is concern about the stock market. 

 

My guess is that the corn market will move at a turtle's pace for the next few weeks and maybe through year end, Every uptick is going to be met with sellers because there is still a sizable inventory in the field that has to be moved. I wouldn't be surprised to see two steps forward and one step back kind of action, with a slow drift higher in price until we reach the targets up above.

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Senior Contributor

Re: Update On Price Targets

The weather is going to lower this crop substantially before its put away
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Senior Contributor

Re: Update On Price Targets

That may happen. I just posted a video from a corn farmer up in Minnesota...very interesting how he used his time when the rain was falling. Had his dryers working full blast, and the combines out at night. The harvest report was not all too discouraging from last week, harvest progress was still two weeks ahead of last year, and crop quality only dropped by one to two percentage points for corn. 

 

We'll see what next week's numbers say. Some places got hit harder than others with the rain, but the decrease in yield estimates yesterday I think took onto account that the weather has had a deleterious effect on what's still in the field.

 

Remember, the long term trend remains bearish, so any move up in price is going to be hard-fought from here. I still think the producers are catching a break with this price bounce since mid-September, and they should take advantage of it by progressively selling any further upticks over the next twenty five cents. This market could turn around quickly, just like what happened in May and June of this year. As much as I would like to see the chart pattern complete at just above $4, I am very sensitive to any signs of weakness from here.

 

https://www.youtube.com/watch?v=bYbuhmx6hoI

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