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This week we go over our thoughts on corn for the rest of this year and 2021. Ending stocks are projected to be around 2 billion but the cash market, futures, and spread market all point to a much tighter balance sheet. South American weather and production will be critical and this is a La Nina year! The US is dry and will need precipitation before planting in the spring. South America is low on corn supplies and Chinese corn is nearly $10!. A lot can happen this year and corn will be a very exciting market. Make sure you take a listen to this week’s Turner’s Take Podcast
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Corn
Below is my supply and demand table for corn. The yellow column is old crop. The middle column is new crop (grain harvested now). The blue column on the right is my estimations for 2021. We have 2021-22 corn acres at 90 million. I’ve seen some early estimates as high as 92mm, and that might be the case, but I think soybeans will rally enough to take some acres from corn. That is why we started with soybeans last week for our 2021 outlook series
At 90mm acres carryout stays at 2 billion year over year. If US old crop corn stocks get drawn down to 1.5 billion or lower than corn acres can go up, but soybeans and wheat will be rallying too as they also need acres. For the moment we don’t see Dec 2021 corn living too long above $4.20 if it should get there. Two summers ago when corn rallied to $4.70, the new crop barely stayed above $4.20 for any length of time. With the current balance sheet and strong prices for wheat and soybeans, it is possible for corn to trade to $4.50 (old crop) and new crop $4.20.
To go higher a few things to consider about 2021 corn
- Chinese corn is about $10 and they are 80% done with harvest. Demand needs to stay strong and US export need to continue to rise
- South America is in a La Nina year. Typically these years have average to sub par production. Note that S.Am is planting record acres so that will help some of the lost production if the weather is generally hot and dry this season
- Unlike last year, S. American supplies are getting low. Nations are suspending their import tax on grain because supplies are already tight and we have barely started planting down there!
- Arg has corn but with 35% inflation corn needs to trade $4.50 or higher before they start selling
- US Midwest is dry. W IA and S IL are in drought. The past couple of years the US soil moisture has been fantastic coming into planting. That is not likely to happen again this spring.
- Global corn export supplies are low. US will be the exporter of last resort if other nations have production issues.
IF, and it is a big IF, Brazil and Argentina lose 5% of their production due to La Nina, a lot of demand comes back to the US. The US could have a subpar growing season this year (and there is a good chance we are dry when planting starts), and if so there might not be enough corn supply in the global export market to make up for losses in US production. IF that happens, and it is a big IF, that is how corn trades to $5 or higher.
As I talked about on the podcast, corn can trade $4.20 to $4.50 if the US has tight stocks or if foreign exporting nations have tight stocks. Corn only goes to $5 or higher if both the US and global market is tight and we need extreme price rationing.
Going forward I like buying calls and financing with puts. I think it is a good strategy for March as a SAm play and July for a US growing season play. I think courage calls will work this year too. Give me a call, email or text for specific recommendations. My office phone is 312-706-7610, cell is 312-651-4621, and email is cturner@danielstrading.com
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If you are having trouble listening to the podcast, please click here for Turner’s Take Podcast episodes! Craig Turner – Commodity Futures Broker 312-706-7610 cturner@danielstrading.com Turner’s Take Ag Marketing: https://www.turnerstakeag.com Turner’s Take Spec: https://www.turnerstake.com Twitter: @Turners_Take Contact Craig Turner
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