Kevin Van Trump, Founder

October 28, 2016

2 Min Read

Corn bulls continue to point to strong demand for U.S. corn and ongoing thoughts that the USDA will once again be reducing their U.S. yield forecast. The bears seem little concerned saying we will still be digesting a record U.S. crop of 15 billion bushels and ending stocks of +2.3 billion.

The bears also believe that Argentine producer could grow an additional +5 to +6 MMTs of corn compared to last year, obviously depending on the weather. I should also note that the International Grains Council recently raised their global grain inventory estimate and now believes China's grain stockpile could reach 200 MMTs, a number we haven't seen since the 1990's.

As I've mentioned the past several weeks, there's a lot of cheap alternatives in the world right now and China appears flush with grain supply, something that may continue to create a headwind rather than a tailwind for corn prices. The point is it might take China some time to turn things around and chew through their glut of domestic surplus. In the process, I suspect this limits any buy-side bullish headlines coming from the Asian giant.

As a producer, I continue to stay fully-engaged as the DEC17 new-crop contract is nearing $4 per bushel. South American weather obviously becomes the major "wild-card" in the weeks ahead. If that "wild-card" never comes out of the deck, the bulls probably never make a hand.  Right now I think you have to ask yourself how much you are willing to wager with some very questionable cards in hand. Remember, demand is strong, but supply is much more burdensome than last year, +600 million more bushels, perhaps even higher.

We also have more cheap feed wheat in play. China is on the sideline and trying to deal with their own glut of grain. Argentina is clearly increasing production and the macro space is offering little in the way of bullish horsepower.

Bottom-line, I just don't see the cards in my hand to be making wildly bullish bets in this market. I'm staying extremely conservative and using rallies to reduce more risk in the deferred contracts!  

GET ALL THE DAILY NEWS IN THE VAN TRUMP REPORT

About the Author(s)

Kevin Van Trump

Founder, Farmdirection.com

Kevin is a leading expert in Agricultural marketing and analysis, he also produces an award-winning and world-recognized daily industry Ag wire called "The Van Trump Report." With over 20 years of experience trading professionally at the CME, CBOT and KCBOT, Kevin is able to 'connect-the-dots' and simplify the complex moving parts associated with today's markets in a thought provoking yet easy to read format. With thousands of daily readers in over 40 countries, Kevin has become a sought after source for market direction, timing and macro views associated with the agricultural world. Kevin is a top featured guest on many farm radio programs and business news channels here in the United States. He also speaks internationally to hedge fund managers and industry leading agricultural executives about current market conditions and 'black swan' forecasting. Kevin is currently the acting Chairman of Farm Direction, an international organization assembled to bring the finest and most current agricultural thoughts and strategies directly to the world's top producers. The markets have dramatically changed and Kevin is trying to redefine how those in the agricultural world can better manage their risk and better understand the adversity that lies ahead. 

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like