A farmer holding on to 2019 corn is in a very tough spot right now, and many are holding that corn, and in large volumes. They’re waiting on a significant price rally, but the prospects of that happening are not strong, leading to one analyst going with a baseball analogy. Arlan Suderman of INTL FCStone says be sure you play a game of singles and doubles rather than relying on the marketing home run.
“It comes down to managing risk and managing risk exposure when you’re on the farm,” he said. “When you’re in a situation like this your first objective is to protect the equity that you’ve built in the farm operation and then as opportunities present themselves to add to that. So, rallies are largely going to be seen as opportunities at this point unless we see something dramatically change the fundamentals beyond what we currently know.”
Prices have dropped to current levels based on eroding demand from the economic crisis and plenty of supplies. Suderman says we’ll likely add to the surplus with this year’s crop.
“When we look at the year ahead and the number of acres that have been planted to corn, and I’m right now using a number of 95.4 million, that may change as we go forward but that’s where I’m at right now for planted corn acres, and you look at the weather pattern that we’re currently in, it would take a drop of about 15 or 16 bushels in the national average yield to justify a move of cash prices up to the 4 dollar level. And I know a lot of people would just like to have something up to the $3.50 level.
Is there really anything dramatic in the long-range weather that suggests lower production and a price rally? Suderman says his firm doesn’t see it. So his advice is don’t be swinging for the fences.