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More of the Same? ...Or Not?

Published on Tuesday, February 21, 2017

In the past we have talked about the eerie similarity of the December 2017 corn contract to last year's performance in the December 2016 contract.  The parallels continue.  See Charts.  What is interesting about the recent $4.05 move is that the move in 2016 preceded the trade between the range from $3.75 and $3.95/bu.  This year, that move has come after a long trade between those same numbers.

But while the same price range has contained trade in both years, there is a defining difference...our point on the calendar.  Last year, markets were expecting little change to corn acres and were then surprised by a bigger growth in that number as we came through the March 31 Planting Intentions report.  This year, we are expecting a decline in acres.  We will gain further insight into the USDA's stance on what this number could be as we come through the USDA Ag Outlook Forum later this week.

As they develop baselines for acreage, more conversation will follow as to what amount of land the corn market must "buy" before spring.  This may change the tune of the conversation for the weeks that follow.  However, we must also recognize that much of the trading universe puts their activity on hold the further we get into the month of March.  This causes price ranges to narrow as volatility declines.  All of that changes once the report is released.  Volatility escalates and price movement makes up for lost time.  With all of the discussion about large losses in corn acreage, the surprise in the March report might come at the hands of larger planting intentions.

While we wait for the numbers, it is imperative that we address the prices at hand.  Current values represent a value that is often close to or even in profitable territory.  Last year's fall values serve as a great reminder as to what can happen as time moves forward with supporting weather and growing crop estimates.  If you haven't already done so, we invite you to take a closer look at ways to posture yourself for the unexpected.  Give us a call at 608-960-4771.