Chicago Board of Trade Market News
USDA will publish their last production estimates for the current 2014/15 season on Monday, January 12, 2015. Pre-report surveys indicate that most analysts expect to see modest reductions in the average yield and harvested acreage. As well, USDA will also publish quarterly grain stocks data on Monday. This data will show the amount of corn stocks on hand after the robust consumption during the last quarter of 2014.
The sizable exports and ethanol production during the past quarter gave large speculative funds the confidence to build a sizable long position in corn futures contracts when they had the opportunity to buy below or near $4.00 per bushel. The fact that their buying was being met by good commercial selling seems to imply that sales, and the resulting future demand, will remain good through the first quarter of 2015.
It is interesting how the future often tends to repeat itself; firms that have aggressively hedged basis contracts at relatively low price levels could find themselves in an uncomfortable position if the upside movement of futures outpaces cash, as previously occurred around the 2007/08 time period. Fuel to the fire could be added if they are forced to lighten up their positions if the basis widens beyond expectations, and then frustrations are heightened as the market settles back shortly thereafter as uncertainties diminish. The key point is that the profitability of feed grain traders in 2015 will likely depend upon their abilities to be anticipatory rather than reactionary.