Corn traders continue to consider many varying dynamics and moving targets. We still have many of the old debates in play, but are now left to consider several new and interesting headlines. My next cash-sale price target for 2015 corn is rapidly approaching. As a producer I am staying patient, but now have my finger clearly on the trigger and am ready to shoot. Below are a few of the main headlines that have been influencing the trade the past few days.
- Ukraine rumored NOT to be able to fulfill some 20% (over 1.0 million tons) of the corn they have guaranteed to China.
- China rumored to be a big step closer to approving US MIR-162 corn imports. There is also talk China has been pulling some of their US milo bids as they are starting to more aggressively buy US based DDGs.
- US acreage uncertainties remain in play. The FSA numbers were supposedly leaked on Friday (official results out this morning HERE), and most still believe 2014 US corn acres could be reduced by 1 to 2 million acres in theJanuary 12th year-end USDA report. The current USDA estimate is at 90.9 million acres. There's also some serious debate starting to heat up in regard to 2015 corn acres. Most sources are starting to raise their previous estimates a bit higher, to somewhere between 87 to 89 million. With nice weather the past several days many folks are seeing a large number of producer out doing fall field work and throwing down the "gas".
- Funds have been more aggressively buying and getting long corn. Several sources now thinking they are long between 225,000 and 250,0000 contracts.
- Ethanol demand being highly questioned with crude oil prices falling to sub-$60 levels and US corn prices staying elevated above $3.75. Many in the industry wondering how long before ethanol margins plummet?
- Largest US corn corp ever produced (2014), assuming most of the current USDA estimates remain intact. CLICK HERE for my daily report....
The REAL Reason I Believe Grains Are Moving Higher
As most of you know, I spend a lot of my time talking to fund traders and large money-managers trying to pick their brains. With another year of big gains in equities and only 12 trading days until year-end, most of the big players seem to be looking for ways lock in profits, hedge against unknown price-risk and decoupling. The crazy uncertainty now surrounding crude oil and the energy sector has a lot of guys spooked and is obviously pushing "fund-money" in several unexpected directions.
A few clear and obvious beneficiaries as of late have been corn, soybeans and wheat. This might be a tough bridge for some to cross, but for others it appears much more logical, especially when you consider we are rolling into what could be more extreme winter weather, continuing turmoil between Ukraine and Russia, an election in Japan, Fed divergence from the rest of the central banks, a newly controlled Republican Congress, Greece and parts of the EU once again moving towards unstable ground. Not to mention the amount of debt the oil companies had on their books 5-years back was only around $200 billion, while now it's all of a sudden up around $3 TRILLION.
In other words there could be secondary derivative impacts the investment world hasn't even thought about yet that players are now trying to reposition and protect against. Remember, we have now seen over 80 straight days of declining prices at the pump. Also remember, this is traditionally a "thin" period of time where moves can become extremely over-exaggerated! In other words, when you get major "headline-risk" like we are seeing in the energy markets, coupled with lower than normal trade volume, all bets are off in regard to traditional fundamental rhyme and reason. Like Bill Gross said this past weekend, "The sharp decline in the price of oil has disoriented markets and changed the perception of the creditworthiness of companies and countries. When levered money moves and tries to seek a safe haven, basically you have violent price movements across the board."