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!