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Will tight-fisted corn sales continue?

Corn prices continue to dominate the thoughts of producers this winter. They have plenty of 2016 corn yet to sell as shown by the quarterly grain stocks report from last month. This report had Dec. 1, 2016 U.S. corn stocks at 12.6 billion bushels, up 10% from December 2015, a new Dec. 1 record. Corn has been stuck in a trading range of $3.70 to $3.40 since the end of harvest last fall. Producers continue to seek prices closer to $4 to loosen the tightly closed bin doors sealed with a thud last fall. Corn basis levels at ethanol plants across Ohio have fallen 10 to 15 cents from levels seen early last month. You can easily wonder why basis levels had declined in spite of little movement from producers. Commercials were actively selling corn hedged on inbound receipts from last fall. They were capturing basis improvement while coring and emptying bins to add to the bottom line. Producers want a different factor to add to their bottom line. Many producers seem determined to capture higher flat prices even if they have to keep the corn stored in farm bins for the next several months.

Producers have to be encouraged by corn price action seen numerous days last month. On multiple occasions corn traded lower almost all day long, only to close unchanged or up two to three cents for the day. Both corn export sales and shipments were often above trade expectations last month. Producers are also encouraged by market sentiment that has taken corn away from the bearish mentality seen much of last fall’s record harvest. The market mentality for both corn and wheat is now: “It can’t really be bearish at $3.50 to $3.60 for corn and $4.00 to $4.10 for wheat.” Keep in mind that “not bearish” does not translate into a bullish scenario.

Soybean prices continue to be above expectations of traders and producers alike. Last month, old crop March CBOT soybeans reached $10.80 while new crop November CBOT soybeans reached $10.40. These prices were above those seen for much of December 2016. Producers were very actively selling both old and new crop soybeans last month. Those new crop prices brought 2017 soybeans near or even above the $10 level. Those are prices at which producers can make money. It is no surprise that many producers have already sold 20% to 50% of expected 2017 soybean production.

In spite of producers being active sellers for 2017 soybeans, they are tight-fisted selling 2017 corn. They want higher prices than those seen late last month when December CBOT reached $3.95. Instead, they desire prices of $4.10 to $4.25 before loosening their grip and selling new crop corn.

At this writing the U.S. is one week into the President Trump administration. He signed numerous executive orders, determined to advance the agenda he vowed to implement if elected. Producers are holding their breath to see if they will be winners or losers with this new President.

March CBOT corn reached $3.71 on Jan. 25, only to run out of steam and close six cents lower. Some link that $3.71 peak for corn to the action of President Trump. Two important questions seem to be looming for corn in coming months. Short term, “Does the mention of a 20% import tax on products into the U.S. from Mexico potentially damage U.S. corn exports into Mexico and stall corn prices?  Longer term, “Will 2017 be the fourth consecutive year of above trend line U.S. corn yields?” Many producers say “no.” They patiently anticipate a spring price rally from weather concerns.

The USDA will be releasing two important reports in the next six weeks. The first will be from their Outlook Conference the third week of February when the 10-year baseline projections are released. Second, USDA will release their March 31 planting intentions report. Corn acres for 2017 could be near 90 million acres, while soybean acres could be 88 to 90 million acres.

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