It is also important to consider some new crop corn sales as well. December 2013 corn futures dropped from $5.75/bu before the Grain Stocks and Prospective Plantings reports on March 28 to $5.20/bu on April 23. Since then, December corn has retraced almost two-thirds of that loss and closed last week at $5.545/bu. That puts new crop cash bids in eastern South Dakota just over $5.00/bu. While that is well below what most producers sold the previous years’ corn crop for, the market fundamentals for the new crop marketing year (starting September 1, 2013) are completely different than the last couple of years in that the stocks-to-use ratio could grow to over 15%. Also different this year is that the corn price is likely to be much closer to breakeven cost of production than in the past couple of years. In fact, some producers likely have a breakeven corn selling price over $5.00/bu, especially those that have bid aggressively on land rent the last couple of years. So, making some sales, even 5%, 10%, or 20% of insured bushels at levels above breakeven now could eventually lower the breakeven sales price on remaining bushels to be marketed later.
As mentioned above, USDA will release its monthly WASDE report on Friday, May 10 at 11:00 am (Central Time). This May update to USDA’s forecasts will include its first balance sheets for the 2013/14 marketing year. While much is already known about the starting place USDA will use for those supply and use estimates, changes can and do occur that could change the market trend. We saw that as recently as March 28.
Figure 1 July 2013 CME Group Corn Futures
The information in this report is believed to be reliable and correct. However, no guarantee or warranty is provided for its accuracy or completeness. This information is provided exclusively for educational purposes and any action or inaction or decisions made as the result of reading this material is solely the responsibility of readers. The author and South Dakota State University disclaim any responsibility for loss associated with the use of this information. There is substantial risk of loss in trading commodity futures contracts and traders should consult their brokers for a full disclosure of these risks to determine whether such trading is suitable for them in light of their circumstances and financial resources.
Source: Darrell Mark