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Weather wild cards for the corn market

Weather wild cards for the corn market

Corn producers in several locations are talking about extremely warm temperatures and early-planted corn starting to show a bit of stress out in the fields. Obviously this has bulls thinking about possible production cuts by the USDA coming in the next 30 days. Informa came out yesterday and reduced their corn acres from their previous estimate back in May and are now about 1.0 million acres lower than the current USDA estimate of 93.6 million. I have to imagine Informa is very close with their estimate of 92.6 million acres. Personally, I've been thinking we would end up somewhere between 92 and 93 million.

U.S. weather is also starting to be more heavily debated. All of a sudden some of the heat that has been viewed as advantageous by the trade to this point is starting to be reconsidered as the corn plant is rapidly advancing and moving into more critical stages where nighttime heat and limited moisture can start stressing the plant. In other words, perhaps the USDA's lofty average yield estimate of 168 bushels per acre might soon start to tick back. I should point out the USDA is still showing the crop rated as 75% good/excellent, which is actually better than last year's 73% at this time. I'm not so sure I'm in agreement!

As a producer, I decided to go ahead and reward the recent rally with another small cash sale yesterday vs. the DEC16 contract at $4.45. As I wrote in my "Special Report," the basis in most areas has gotten extremely weak for new-crop as prices have rallied, so it seems many folks are using the board or booking HTAs and/or "futures first" type contracts with local elevators and waiting to lock basis at a later date. I am now at level where I feel much more comfortable about my overall risk and will be decidedly more patient in pricing additional new-crop cash bushels.

As a bull at the poker table, it has been nice to pick up a few more optimistic cards the past couple of weeks, i.e. the recent rally in soybeans, the problems in South America, increasing U.S. export demand, La Niña headlines, etc. I suspect if we can draw a couple of additional bullish weather wild cards in the next 30 days, bulls across the market will quickly start upping their bets.

As a producer I'm now going to take a wait-and see approach.


TAGS: Corn
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