Will corn test $7 or is a return to $6 a more likely outcome?

By Jon Scheve, Superior Feed Ingredients, LLC

There are many factors that could impact corn prices moving forward.

Reasons to be bullish corn

  • Argentina crop conditions continue to deteriorate, and early estimates indicate yields could be 20% below normal.
  • A decrease in Argentina production could increase U.S. exports and tighten carryout.
  • New crop bean values in the U.S. and high fertilizer costs may buy some bean acres away from corn this spring.
  • Rumors of China buying more U.S. corn.
  • Funds continue to buy corn and other commodities as an inflation hedge.
  • U.S. corn remains competitive on the world market.

 Reasons to be bearish corn

  • Brazil is forecasted to grow more corn this year than last year and the planting pace is well ahead of normal. Early planted corn tends to miss dry weather associated with the later part of the growing season in that country.
  • Argentina’s corn production last year was also predicted to be 20% down from normal, but ended up being down significantly less than that prediction.
  • U.S. export pace is not meeting current USDA estimates.
  • Rumors of Chinese corn purchases have not shown up in the cash markets as actual sales yet.
  • Total Chinese corn imports are expected to decrease nearly 30% this year compared to the record levels last year.
  • Some in the trade are suggesting that feed demand in this country will not meet current USDA estimates.

Other factors that could affect the corn market

  • The Russia/Ukraine situation is still unresolved, and the outcome is unclear.
  • April and May weather in Brazil could end up affecting U.S. crop demand in late summer.
  • U.S. weather in June and July will have a big effect on price direction later this summer.

Bottomline

With so many unknown factors that could change price direction, continued volatility should be expected. 

On Feb. 10, an open order to sell March corn futures at $6.50 I had in place was hit. The order was on 10% of my 2021 production and moves me to 70% sold with futures on my old crop corn. Also on Feb. 10, an open order to sell December corn futures at $5.90 I had in place was hit. The order was my first 10% sale of my 2022 expected corn production.

Please email jon@superiorfeed.com 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.

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