CIS and the 2013 Corn Market...

Following record high corn prices in 2008, 2011 and 2012, the industry was expecting more of the same during 2013. However, CIS began to question this complacent attitude as early as January 2013. The following excerpts were taken from issues of Price Perceptions during the year of 2013.
 
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1. 01/05/13 “The USDA’s January 11 reports are generally expected to be bullish for old crop futures. Therefore, a price recovery should occur in anticipation of the reports. However, unless they are significantly more bullish than our foregoing estimates, we do not expect a sustained price advance. After all, higher prices will only discourage demand even more.”

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2. 02/16/13 “Old crop corn remains extremely tight. However, price rationing is being accomplished through an inverted futures market and historically strong basis (cash price above futures). If December futures remain near $5.50 during the month of February, crop insurance proceeds should be high enough to encourage planted acreage near 98 million, the largest in modern history.”

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3. 05/04/13 “December futures are expected to remain in a range of $5.20 to $5.80 until planting progress is better known into late May. If planting progress regains momentum by late May, we expect December futures to return to the downtrend and test the $4.70 level into June.”

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4. 06/22/13 “We continue to expect December futures to trade in a range from $5.00 to $5.80 into the June 28 acreage report. If the report is interpreted bullish, a spike high is possible into early July. Barring extreme weather in late July, we continue to expect December futures to work lower toward the $4.00 area into harvest.”

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5. 07/06/13 “Although old crop corn supplies are tight, nobody will want to own an inventory that will fall in value nearly $2 per bushel over the next two months. Therefore, while cash markets may remain strong into late July, support due to tight cash markets will dissipate as southern harvest begins in mid-August. If Corn Belt weather remains benign into early August, December futures should be expected to move toward the $4 level sooner rather than later.”

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6. 08/24/13 “Results of the Pro Farmer crop tour were released following Friday’s market close. Their corn production estimate was 13460 million bushels compared to the USDA at 13763 million and our forecast of 14009 million. Pro Farmer reduced harvested acreage 1.8 million from the USDA estimate compared to only 1.0 million in our calculation. Their yield estimate was 154.1 bushels per acre compared to the USDA at 154.4 and CIS at 159.0. The marketplace has already factored in yield and production very near the Pro Farmer tour estimate. Therefore, we doubt futures will respond strongly. However, if production eventually approaches our estimate in months ahead, a harvest low near $4.00 will be justified.”

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7. 08/31/13 “Although yield and production will fall below expectations of a few weeks ago, crops will still be large. With corn and soybean futures advancing sharply the past two weeks, it will be difficult to maintain bullish momentum as harvest picks up speed in weeks ahead. We believe fall highs were made early this week and rallies on yield and production estimates should be sold for the downtrend into harvest.”

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8. 11/16/13 “The EPA proposed a reduction in the ethanol mandate to about 13 billion gallons from the original mandate for 2014 of 14.4 billion. We expect this proposal to be tied up in courts for many months and doubt it will have a major impact on the corn market. With or without the revised mandate, the world is awash in corn. Futures must find a level that encourages much stronger demand if prices are to remain above $4.00 per bushel.”

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December 2013 Corn
©2013 CQG, Inc.
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