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 Farmers now looking for cash to pay off debts and buy seeds for
next season have been lured to sell by a four percent rise in corn
futures over the past two weeks. That rise came after speculators
with huge short positions were caught off guard when the U.S.
Department of Agriculture (USDA) cut its corn and soybean harvest
views on Jan. 12.
Speculators slashed their bearish bets in the CBOT corn market by
more than 36,000 contracts in the week ended Jan. 19. They also cut
net short holdings by nearly 28,000 contracts in soybeans, according
to data released by the Commodity Futures Trading Commission on
Friday.
In the eastern Corn Belt, tiny bumps in grain basis bids - the
differential with futures that is paid for cash deliveries - have
helped generate some selling interest in recent days.
Archer Daniels Midland Co <ADM.N> has lifted its spot corn basis bid
at its massive Decatur, Illinois, processing plant by 6 cents per
bushel over the past two weeks. Given gains in the futures market,
cash prices there are up more than 20 cents a bushel.
 But the amount of grain that moved into the supply chain is thought
to be more of a trickle than a tsunami, say traders. And futures
prices have not roared back, they say, in large part because of
persistent concerns among grain traders over massive global stocks
and tepid demand growth.
Soybean prices, up about 1 percent over the last two weeks, are
facing headwinds as the harvest of another bumper South American
crop ramps up.
Benchmark March futures for corn on the Chicago Board of Trade ended
on Friday at $3.70-1/4 per bushel while March soybeans closed at
$8.76-1/2 a bushel.
How much of the near-historic volumes of corn and soybeans stored on
farms has been sold and moved into the supply chain in recent weeks
is not known. Cash prices for these sales are also hard to pin down
in a market without screen trading.
But traders are beginning to question the assumption that low prices
had farmers hoarding as much grain as they thought.
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"There's still a significant amount of bushels to be sold, but not
nearly as many as we had originally thought," said Ted Seifried,
chief market strategist at Zaner Ag Hedge.
About 61 percent of the country's corn stockpile was held on farm on
Dec. 1, the lowest since 2012, USDA data showed. Grain traders had
expected that percentage to be closer to 69 or 70 percent.
Nevertheless, on-farm soybean stocks were still the second-highest
level in more than seven decades, and on-farm corn stocks hit their
third highest in nearly a century, USDA data shows.
U.S. farmers typically sell off much of their grain between Dec. 1
and March 1 to pay operational loans, fertilizer and seed purchases,
taxes and land rent bills. But selling slowed when grain prices
sharply dropped in the fourth quarter of 2015.
But now prices still remain lower. Ohio farmer Keith Truckor sold
some grain late last year at just over $4, but is holding back some
of his crop, hoping for a rally.
"Corn prices need to hit $4 for us to make a profit," said Truckor,
53, who is storing the rest of the corn on his 1,400 acre family
farm in northwest Ohio.
(Additional reporting by Justin Madden; Editing by Jo Winterbottom,
Bernard Orr)
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