Corn bulls are talking about a possible short squeeze in the frontend of the market, the JUL19 contract, which is challenging a 5-year high. As I've been reporting, cash basis bids have been tightening in many locations and the market is getting wound tighter and tighter. People were laughing a month ago when I first started talking about $5 corn and 8-year cycles.
As a producer, I still see no compelling reason to make additional new-crop or extended sales. I've followed my own personal rules and have gotten 50% of our estimated production priced, now I want to sit and wait. I want to give the market a chance to digest and breath a moment. I truly believe the next leg could be even bigger! If weather further complicates during the growing season or during harvest, more bushels and more acres keep getting trimmed. Which in my opinion means more "risk-premium" gets added.
I'm still not comfortable debating the possibility of a sub-12 billion bushels crop. I know most insiders want to talk 12.5 to 13.5 billion bushels, but I'm not so sure. If total production falls sub-12 billion bushels, we move through $5 quickly. I say hold onto your hats, this bull train is about to leave the station! We come in next week with the clock beyond June 15th and still a mess of acres un-planted and a huge number of acres still needing to be re-planted. End-users need to be very careful here and looking for ways to hedge on the pullbacks. It just feels like this market is coiling... and looking more and more dangerous to the upside. Which is good for producers, but bad for end-users.
As a spec, I'm staying long on the futures in the JUL19 contract and long options all through the backend of the market. If you are wanting to price cash bushels or needing to catch up sales, I still like the thought of selling the cash on the big up days and waiting to re-own with an option strategy of some sort on the down days. More bulled up as each day passes and the clock continues to tick! Keeping an eye on the rains this weekend in parts of Illinois, Indiana, Missouri and Ohio.