Is the corn market still in the grips of the bear?

New-crop (2014-15) corn prices have since gained on bean prices (Charts 2 and 3), but bean planting would still be more profitable when compared with the historical norm.

While U.S. export commitments are still more than double last year’s level, traders believe that we could see the torrid pace of sales begin to fade. China keeps turning away U.S. corn because shipments were found to contain GMO corn that has not been approved for use by the Chinese government. We maintain that it is not quite the issue that the headlines seem to make of it. Total Chinese corn imports from all sources – which includes the U.S. and other producing nations – amounts to roughly 5% of world trade. It is not nearly the issue that it would be for other commodities, such as soybeans, for example, where Chinese imports comprise between 60% and 70% of world trade. Still, U.S. corn exports have been almost nonexistent for the past two weekly reporting periods, so it is a matter that bears scrutinize.

The U.S. remains the world’s supplier of last resort for corn. The picture presented by the 2013-14 balance sheet is not quite the bountiful result that the market was expecting. Hardly a disaster, but definitely a disappointment. It is still too early to determine if enough acreage will move to other crops. To avoid a return to dangerously low stocks, new crop prices will have to move higher to encourage a more balanced approach when farmers choose between corn and beans come spring.

Establish long positions in new-crop December corn. Place initial stops at $4.25 per bushel, close only.

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About the Author
Sholom Sanik is an analyst with Friedberg Mercantile Group Ltd. He can be reached at ssanik@friedberg.ca
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