katrina
Well-known member
A Volatile Corn Market Twitches
"The best news for corn producers is that USDA raised its projected range for the U.S. average on-farm price of corn by 30¢/bu. on both ends and now sees prices averaging $3.20-3.80 during 2007-2008," reports Brock Associates after USDA released its Crop Report on Friday.
However, USDA's bump in projected corn prices was lower than the market expected, and the market's initial reaction to the news was negative, says Richard Brock, Brock Associates president. "The market was expecting a more bullish report for corn, and it didn't get it."
Still the USDA's new numbers put a higher floor on what corn prices might fall to this marketing year, says Jim Hilker, Michigan State University Extension marketing specialist. Hilker posted "Probabilistic Price Forecasts for Corn" on Nov. 6 and says those price forecasts are still valid after USDA released its Crop Report on Friday.
"Both historically and profit-wise, the futures prices for corn are really good, even if you have a weak basis price right now," says Hilker. "By March, I think basis prices will be stronger, especially if you're near an ethanol plant. For now, the market is telling farmers to hold onto their on-farm stored corn, and there's more than enough of a price spread to cover storage costs."
According to Hilker's forecasts, which are based on options markets, there is about a 50-50 chance that March corn futures will be close to $4/bu. "There is a 10% chance that the price will be higher than $4.90 and a 10% chance that the price will be less than or equal to $3.23," predicts Hilker. "This indicates that there is an 80% probability that the price will fall between these two prices. There is a 50% chance the price will be less than or equal to (or greater than) $3.97."
The middle values to these probable prices (the prices in the 80% probability range) "have proven to be quite accurate in the past," says Hilker. However, he reminds farmers that these are futures prices that have to be adjusted by the local basis price. Although Hilker predicts that basis prices will increase in March, the basis prices typically decrease at harvest.
"The best news for corn producers is that USDA raised its projected range for the U.S. average on-farm price of corn by 30¢/bu. on both ends and now sees prices averaging $3.20-3.80 during 2007-2008," reports Brock Associates after USDA released its Crop Report on Friday.
However, USDA's bump in projected corn prices was lower than the market expected, and the market's initial reaction to the news was negative, says Richard Brock, Brock Associates president. "The market was expecting a more bullish report for corn, and it didn't get it."
Still the USDA's new numbers put a higher floor on what corn prices might fall to this marketing year, says Jim Hilker, Michigan State University Extension marketing specialist. Hilker posted "Probabilistic Price Forecasts for Corn" on Nov. 6 and says those price forecasts are still valid after USDA released its Crop Report on Friday.
"Both historically and profit-wise, the futures prices for corn are really good, even if you have a weak basis price right now," says Hilker. "By March, I think basis prices will be stronger, especially if you're near an ethanol plant. For now, the market is telling farmers to hold onto their on-farm stored corn, and there's more than enough of a price spread to cover storage costs."
According to Hilker's forecasts, which are based on options markets, there is about a 50-50 chance that March corn futures will be close to $4/bu. "There is a 10% chance that the price will be higher than $4.90 and a 10% chance that the price will be less than or equal to $3.23," predicts Hilker. "This indicates that there is an 80% probability that the price will fall between these two prices. There is a 50% chance the price will be less than or equal to (or greater than) $3.97."
The middle values to these probable prices (the prices in the 80% probability range) "have proven to be quite accurate in the past," says Hilker. However, he reminds farmers that these are futures prices that have to be adjusted by the local basis price. Although Hilker predicts that basis prices will increase in March, the basis prices typically decrease at harvest.