By Jon Scheve, Superior Feed Ingredients, LLC
In 12 of the last 15 years December corn futures have had a pullback in August or September. This seasonal trend is usually due to several factors:
- By this time of year, weather’s impact on corn yields is limited as the crop approaches maturity
- Farmers tend to sell off the last of their old crop still sitting in the bins
- Harvest is approaching, so an influx of new supply will be available soon.
This year is no different. A few farmers still clinging to the hope of record prices are likely moving the remaining corn out of their bins as we approach the harvest of a new crop. This is likely leading to a small pull back in the market.
National yield estimates are still uncertain as the eastern belt may still potentially increase yields while late-season dry weather has negatively impacted the west. Traders are now turning their eyes to the September USDA report for yield trend direction.
It’s unlikely end users have covered much of their usage needs for fall and winter. Many were expecting trendline yields and were expecting a pullback in prices after the August USDA report. Any dip in the market will likely be seen as a buying opportunity to get coverage on through the end of the year.
In 10 of the last 15 years corn futures ultimately rallied from their August or September lows at some point during or immediately after harvest. Strong export demand, or a further yield decrease could turn the market higher.
Beans took some hits at the end of the week. The futures market was “spooked” by headlines in the news that the EPA wanted to shrink biofuel mandates for 2021 due to less overall demand this last year. However, it’s likely commercial traders had already anticipated the demand change, and many traders believe these numbers are already figured into USDA demand estimates for next year. Also, there are indications the EPA plans to suggest increasing 2022 mandates to levels higher than those of 2020 and 2021. There is an expectation that these new target levels will be released when their 2021 goals are published.
Recent announcements of new biofuel plants across North America, should be seen as positive for prices long-term. But, for the next 2 months many market participants will wait to see what estimated harvest yields will be.
Please email firstname.lastname@example.org with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.
Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.