Just a heads up, I’m not a commodity expert, but I’m keen to give it my best shot. So, keep that in mind as we dive in!
Have you been tracking corn prices recently? You might’ve noticed a halt at the $7.15 level, a mark set last September and October. Likely, a lot of investors decided to take profits at this level. All this is happening just before Friday’s acreage report, which many believe could significantly influence the market.
Expectations around this report are varied. Some anticipate a similar outlook to the last report in March. Others predict a significant drop in corn acres planted – think 500k+ acres less. If the actual numbers come in below market expectations, it should be a positive shift for corn prices.
In the grain stock department, the USDA surprised everyone with their last report. The grain stock numbers came in lower than what most folks expected, and it did stir the pot.
A critical factor that everyone is keeping tabs on is the condition of the crops. Currently, there’s a severe drought in the Corn Belt, and we’re experiencing some of the worst crop conditions since 1988. Some regions are even on track for the driest June ever. That’s not exactly a record anyone wanted to break.
On a brighter note, weather forecasts indicate some much-needed rain is coming to the Corn Belt. The coverage looks a bit uneven, and it’s challenging to predict the exact amount (1, 2, 3 inches, etc.). So the question remains, will it be enough?
So let’s sum this up. We’ve got to pay attention to three key things: acreage numbers, stock numbers, and weather patterns.
Here are three possible scenarios:
- Base Scenario: No change in acreage and stock numbers, and the Corn Belt gets the necessary rainfall.
- Worst Case for Corn Prices: Acreage and stock numbers come in higher than expected, and the Corn Belt gets enough rainfall.
- Best Case for Corn Prices: Acreage and stock numbers come in lower than expected, and the Corn Belt receives little to no rainfall.
Looking back at the corn price chart, the post-pandemic price surge seems to be slowing down. Some might even spot an angled head and shoulders pattern on the daily. If the price breaks below $5.70, it’s not a great sign for corn. A further drop below $5.30 is even more concerning. If you measure the head and shoulders pattern from the head to the neckline, prices could potentially revert back to pre-pandemic ranges.
In conclusion, if you’re considering going long on corn, or if you’re a farmer, a scenario of lower acreage numbers, lower stocks, and little to no rain in the belt could open up a good opportunity to go long, book profits, or negotiate better contracts.
I hope this analysis helps anyone trying to navigate the corn market. As always, stay vigilant and keep those reports and weather forecasts close by!