Clear Focus Hedging News and Views
July 1, 2023
Yes, in a big way. In just over a month we have watched December corn make a low of 4.90, rally to 6.30, and fall back to a low of 4.94 last Friday. Funds went from nearly 100,000 contracts short to nearly that long, and after Friday's close are estimated to be back on the short side of the market. Money flow DOES drive the market! We went from a fast start to planting and bearish news out of Brazil to a major weather market, and now, to a bearish report on corn acres combined with some general rains in the corn belt. At this writing, totals are still being added up, but it's safe to say that the dry areas are getting smaller. We list the negative factors below:
  1. USDA reported over 2 million more corn acres planted above the average guess
  2. Corn used for ethanol and corn exports continue to lag estimates, could possibly be cut 50 million bushels each in the July 12th Supply/Demand Report
  3. Many dry areas have gotten some rain over the weekend, and short term forecasts keep extreme heat south of the corn belt
  4. Funds have been selling, and may continue unless weather or demand changes
  5. Crop conditions should improve in Monday's report
   While all these factors are bearish, there were some bright spots to look at as well:
  1. The Quarterly Grain Stocks Report was actually friendly corn, coming in 150 million bushels below the average guess, implying a higher feed and industrial use, or simply a smaller crop last year
  2. Bean acres down over 4 million from the average guess may mean substitutes for meal may be sought, possibly more wheat use as harvest begins
  3. While the rains have been welcome, it is estimated that at least 25% of the corn belt is still too dry
  4. Crop condition ratings are the lowest in recent history for the end of June, will they improve substantially? How much will they impact the trade?
  5. Lower prices could stimulate demand 
Looking ahead to the July 12th Reports, USDA will update yields and total production using the acre numbers from June 30th. The big question is how they view yield potential given the poor crop conditions, will they be aggressive or cautious in adjusting both corn and beans. They will possibly adjust production from South America, as bean harvest is essentially done, and safrinha corn harvest is well underway. Demand is also a question, as the previously mentioned export and ethanol programs, and also the feed and industrial use being higher given the lower stocks numbers. Bottom line is we feel traders will be looking for a slightly lower carry out for 22-23, but quite possibly a carry out in excess of 2 billion for 23-24. The trading week will start with regular open Sunday night, and regular hours Monday, July 3, but after that close the market will not reopen until 8:30 Wednesday morning. One thing that is very important to do now, is visit with your crop insurance agent, as prices have fallen to levels that may cause your policy to "kick in" especially if you have average or below average yield prospects. 
We mention this, as the insurance you bought is essentially a put option, and being "double short" with sales in futures or cash, or put options or spreads are figured in. Make sure you have a handle on coverage, and then let's look at your overall position. A good way to do that is through the "Tracker" and we offer a screenshot of that below.

If you have put/call spreads on now, give us a call to see about the following and if any of the choices interest you:
  1. Consider exiting short calls in corn, as the values have gone down dramatically. For reference, December 7.00 calls went from 3 cents to 23 cents back to 3 cents in the last 5 weeks
  2. Consider rolling puts down to maintain downside protection, but also capture some of the gain in value
  3. After looking at price and yield estimates, consider putting in open orders for sales at a price you are ok with. 
  4. For beans, consider sales or puts on any further rally. While bullish, its hard to tell when the buying will run its course, but after the huge swings lately, anything can happen!
It looks very bearish now for corn, but it did 5 weeks ago as well. The next 3 weeks of weather will be critical as water needs for the crop increase, and temperatures at pollination will be as well. Beans may have wethed the dryness better early, but August rain will be far more important so we would take nothing for granted, as our yields are important, but the price and pace of Brazillian beans will be important also. Can you forsee more beans coming into the US from Brazil? That development has stopped rallies before. In light of the past 5 weeks, fund activity will be huge, and any development in weather, demand, or geo politics can change price quickly. Stay in touch!
In conclusion, it has been quite a June to remember, with gut wrenching emotion with low markets, no rain, a sharp rally and now another big selloff in corn. While we will remember it for many years, the basic lessons of marketing and risk management still apply. When the market rallies, reward it. When spec money drives prices into profitable levels, take some cookies off the plate, or at least use some of the tools to insure a profit. While crop insurance is a valuable tool, when price exceeds the spring price, it lowers the deductable for the policy. 5 weeks ago we were wondering if we would ever see 5.91 again this year, and we saw 6.30, only to see it disappear in a couple days. The window was very small, but good prices are possible when we put the fear of missing higher prices behind us and focus on profit levels. We don't know if we will see $6 again for corn this year, but we never say never with price action like the recent chart shows. Have a great Independence Day, celebrate our freedom and ability to choose, and stay tuned, we doubt the wild ride is over yet!
Every Monday: Export Inspections 
Every Thursday: Export Sales
July 12th:  Crop Production, Monthly Supply/Demand Reports
July 21st: Cattle on Feed
July 21st August options expire
Mike Daube: 574-586-3784 or 574-910-3818 cell
Allen Gard: 573-221-9234
Peter Schram: 317-910-1473