I just realized it’s been a month since I last did a data dump. Sorry not sorry. It’s been one heck of a month, and this is still a volunteer gig…and at least hopefully worth what you’re paying for it…
The corn market took it in the shorts for a couple of days leading up to the JUNE WASDE because folks were afraid the Gubmint would just tweak supply a little and dial demand down enough that we’d see no significant tightening of ending stocks. Proving once again that trying to forecast government reports is a bad idea, the USDA bean-counters dropped the largest MAY production cut in history, with barely a scrape to demand, and the market subsequently rallied again in style.
Remember back in May sometime I said that planting rallies tend to peak once planting progress eclipses >90%? I’d take a mic drop on that one, but we’re currently staring at a huge chasm of uncertainty, and I’m certain to make some embarrassing forecasts in the coming weeks.
When I last posted the seasonal projection plot, it was suggesting the final weeks of the seasonal run were at hand. With another WASDE in the rearview mirror, and stocks/use ratio at <12%, the forward projection is looking a bit less scary, with another price bump anticipated next week (coincident with the next WASDE is my guess). However, after that, the gravitational pull of the tin-can harvest remains in the forecast:
As usual, the red line in the projection plot is the Seasonal Averaging Contract price, which ended a couple of weeks ago at $4.06/bushel. As unsatisfying as it may feel to be priced >30 cents below the current market, it’s important to keep in mind that the seasonal average has trailed the seasonal high 100% of the time (duh…). Over the past 20 years, the Seasonal Average price (calculated using this year’s window) has exceeded the harvest price by 30 cents on average, but trailed the seasonal high by nearly 65 cents.
I have a hunch this is going to be one of those 1 out of every 6 years where the fall price will be higher than the “Seasonal Average”. Therefore, I expect to buy more call options to cover a portion of my sales, at least until it’s in the bin. Until the third week of June I long enough call options to cover nearly all my sales, but I liquidated all of them during the 3rd week of June a few days before options expiration, on what turned out to be pretty lucky timing. I did buy one call option ahead of the June 28th Quarterly Stox and Acres report, but I sold that again for a 9-cent ding right after the report.
My expectation is that the market will be softer and more choppy for awhile. All the big money players have a very good idea what’s out in the fields at this point, and we should soon begin to see crop condition scores improving for awhile. Barring a new black swan event (maybe China hits the panic button on their corn crop??), I don’t see any reason for the price to go much higher until this fall, when folks can start worrying about frost risk, and combines begin to reveal the good, bad, and ugly truth.
I was planning to write a bunch more blah blah blah, but my wife just called and the fish are biting…so I’ll have to finish this later…
The BullSheet 