Seasonal price patterns suggest that corn prices will likely peak in early July. But with recent price patterns caused by drought, bullish oil and other factors, will that be too early or too late to book much of the 2013 crop?
As the percent of corn crop planted jumped from an estimated 28% to 71% during May 12-19, new-crop prices may still be teetering to go in either direction.
“If we see good growing weather in June, we still could see December corn futures under $5/bu.,” says Chris Hurt, Purdue University Extension economist and grain marketing specialist. “And it could go down to $4.50 if the crop is really good.”
December corn futures closed Friday at about $5.36, down about 1.5¢ from Thursday. Darrell Good, University of Illinois grain marketing economist, says if 2013 production levels reach current expectations, further weakness in new crop prices would be expected.
“Of course, that is the question,” he says. “What kind of summer weather will unfold? For old crop, current price premiums suggest a strategy of spacing additional sales over the next several weeks. For new crop, production uncertainty along with prices well below the spring crop insurance prices (about $5.65/bu.) suggests a strategy of modest sales for those with high levels of revenue insurance coverage.”
Hurt says growers shouldn’t get complacent about marketing, even if they have a sound revenue protection plan. “Producers might have a crop insurance guarantee, but if that guarantee is on 80% protection, that reduces $5.65 to $4.52 (for the entire crop),” he says.
“They should look for some sales to lock in good prices in the event the markets fall. If they see $5.50-5.70, they might look at getting 25-30% forward priced.”
That would be “catch-up” marketing, Hurt says, “because my sense is producers didn’t get as much spring pricing done as they have in the past. With the overall downturn in prices (following the March planting intensions report), basically that’s a time when we don’t do a lot of pricing.”
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Stronger demand, thanks to more ethanol producers getting back in the market and more encouraging new-crop export sales, could help hold prices up. “Although there’s still no pressure for exports to come back quickly (after higher prices), this week the Chinese are buying new-crop corn,” Hurt says. “Lower prices will get some of the corn exports back.”
He adds that with late planting and the chance for yield reductions, “there is hope that the corn price is trying to bottom out.
“I think we are trading sideways now,” Hurt says. “New crop has been between $5.10 and $5.70. But we still can’t be convinced we have seen a strong bottom.”
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