Corn Farmers Opened the Flood Gates
Farmers across the U.S. made a decisive move to hit the sell button during the first half of December. Without even calling the local elevator, the signs were clear. The CmdtyView US Cash Corn Price Index showed a steady rally through harvest, signaling a shift in supply and demand fundamentals. But what happened starting December 5th, and why?
Around December 5th, farmer selling began to accelerate. This shift is evident from two key indicators: basis and futures spreads. On December 5th, the CmdtyView US Corn Basis Index started to decline. Shortly after, the March-May futures spread began to weaken after reaching a bullish 5¢ carry. As of the time of writing, the carry was at 6’4¢, covering 34.3% of carrying costs—still a bullish signal. These indicators revealed that local buyers were meeting their needs, and the break in the spread confirmed this trend.
Further confirmation came from the CFTC’s Commitment of Traders (COT) report. For the week ending December 10th, the Producer/Merchant/Processor/User category increased their short positions by 73,223 contracts, equivalent to approximately 366 million bushels.
These indicators align to tell a compelling story: farmers decided it was time to sell.
Why Did Farmers Sell?
It's anyone’s guess why the farmer decided to sell, but here are a few:
Cashflow Needs: more talk about cashflow needs and it is year end.
Improved Basis: Sharp improvements in local basis levels provided better selling opportunities than harvest.
High Cash Prices: The highest cash prices since June 2021 made selling particularly appealing.
What’s Next for the Corn Market?
With a sizable amount of farmer corn already sold, the market is at a crossroads. Here’s what to watch:
Futures Spreads Stability: Will spreads like Mar-May and Jul-Sep maintain bullish carries? Early signs on December 16th and 17th showed firmness returning, but it’s worth monitoring.
Basis Index Movement: The US Basis Index appears to be stabilizing, but another short price spike has triggered additional farmer sales. Stability here could signal a pause in farmer selling.
Trend Changes in Cash and Futures Prices: Moving averages are key here. They help identify shifts in trends rather than just serving as static support or resistance levels.
Takeaways
December’s surge in farmer selling was fueled by a combination of financial incentives and market conditions. Managed Money’s growing bullish position on corn adds another layer of complexity, increasing the stakes if a potential liquidation event takes place. For now, the market is focused on whether demand remains strong enough to support prices or if the recent rally has run its course.
Stay tuned as we monitor the basis, spreads, and price trends for more clues on where the corn market is heading next.
Garret Brown
Founder | Market Advisor
Having grown up on a farm, Garret respects the wide range of skills needed to run a successful operation and recognizes farmers are often stretched thin trying to do it all. This understanding, along with his affinity for markets, fuels his drive to make tough marketing decisions simpler for farmers.
Leveraging his experience in grain origination and margin management, Garret analyzes technical and fundamental market information. With the assistance of CODAK’s algorithmic signaling platform, he puts together buy/sell recommendations while working with the CODAK team to create strategies that accommodate each farmer’s personal risk tolerance, on-farm storage capacity, and break-evens.