U.S. corn farmers could be tempted to sell to stretched processors if government data on supplies due on Thursday helps push cash prices over a $4-per-bushel psychological barrier.
With futures prices slipping, Archer Daniels Midland Co and Ingredion Inc are both offering premiums for cash corn at the highest levels since September to ensure enough supplies to keep on crushing to make products such as ethanol and dextrose, grain brokers said.
Processors are unwilling to push premiums much higher as grain stocks remain lofty, suggesting a rally in futures will be needed to push outright prices to a level where farmers will sell.
"Farmers are being a real tight holder, including me," said Cory Ritter, who grows corn and soybeans in central Illinois. "When the market gets a bump, we'll reward it."
On Wednesday, CBOT corn fell for the third straight session to $3.79-1/4 per bushel and the contract is hovering near multi-year lows.
Premiums have risen steadily and in Decatur, Illinois, where ADM has a massive processor, bids for corn were 14 cents per bushel above futures. Outside Chicago, where Ingredion has a corn mill, bids were 8 cents above futures, the brokers said.
Cash bids are typically made at a differential to the futures price which is known as the basis.
ADM declined to comment. Ingredion did not respond to a request for comment.
The USDA is expected to raise its forecast for end-season stocks on Thursday.
If the figures are below expectations, that could trigger a rally in CBOT futures that, combined with the cash premiums, sparks selling by farmers.
"You'll see farmers sell at $4," said broker Mike Hall, who advises commercial grain elevators.
Without a rally, farmer sales may not resume until June - when their new crop is planted and pollinated, and they feel confident about harvest prospects.
"Right now, there's a premium but when you get into May and June slots, the (corn) bid is well below the five-year average," Hall said.