As summer comes to an end and harvest approaches, it’s not unusual for corn to make a seasonal low in September or October. However, one analyst says the low could be in before Labor Day and producers should plan accordingly.
According to Bob Utterback, the corn market is setting itself up for a pre-harvest low. Chip Nellinger of Blue Reef Agri-Marketing Inc. agrees, in fact he thinks the low will arrive within the next six weeks.
“I could see a low in corn coming ahead of Labor Day just because harvest is going to be early,” Nellinger explained. “Right now the market expects a record crop and I think we've gone a long way towards digesting the biggest crop number that the market is going to trade.”
Nellinger said the trade war and issues related to tariffs are going to cause markets to be volatile. When you combine that with the seasonality of the corn market, producers need to be prepared.
“Livestock buyers we need to get our feed hedge protection,” Utterback said. “I would be heavily defended for the whole next year's production, especially the April, May, June, July, August, September [time frame.] I'm gonna buy an in the money call so I can cap my cash flow exposure.”
Utterback says grain sellers should be selling Dec. 2019 corn above $4.25.
“I think you need to be thinking about how to get a call bought and maybe reduce costs,” he said. “So that call insurance is in there in case you want to sell cash. So I'd be looking at $4.50 corn calls in December and probably $10.68, $11 soybean calls and get those in place by probably no later than mid-October.”