Gulke: Long-Term July Corn

In previous columns, I discussed whether there was going to be enough storage to accommodate the 2025 crops. I had hoped to put to rest the wishful thinking that there would be a glut of selling at harvest. So far, it hasn’t happened in either soybeans or corn, yet the media continued to make that question a headline. Reread my Sept. 9 column for more on that topic.

Last week, I wrote that it was time to decide whether to store or sell the unsold inventories at harvest. Included was a graph depicting the carry for corn and soybeans. In last week’s column, I addressed what I felt was folly to pay 37 cents to store until Feb. 1 when the cash carry from now to then wasn’t even close to matching the implied carry of futures. That case is closed: My soybeans are gone, priced with some upside coverage through Nov. 10 with cheap Dec call options, allowing me to benefit or not, until the next WASDE, which could show influential yield updates, either pro or con. The same scenario was mentioned as valid for corn and that I would act/react when appropriate and when I had some evidence it was time to do so.

The decision for those using on-farm storage is somewhat different, unless you just want to store and let time pass, expecting the market to pay in cash what the July futures are implying or waiting on a future tariff making corn “earn” the carry. By earning the carry, I mean cash corn with a -40 basis at harvest (my area) and an expected basis of -20 on July 1, PLUS the futures carry of another 31 cents, for a hoped-for total gain of 51 cents.

Hoping for such a gain in the cash market may be suspect at best, disillusioned at worst. Hope is not a plan. I’ll reference the July corn chart accompanying this column with some bullet points for you to ponder.

— July 3. I have referred to corn needing to close above July 3 to validate my thoughts of more upside. Note that on July 7, corn gapped lower. That down gap set the stage for concerns I expressed ever since that it may take a lot longer for price enhancement from that level. Corn rallied back but failed to close the July 7 down gap, a negative sign that reinforced the “S” sell signal.

— Corn bottomed (L for long) on the Aug. 12 WASDE Report. The subsequent rally lasted the proverbial six weeks, which again was referenced in this column, as the time it takes (six weeks) to digest the extent and the magnitude needed to reflect a new dynamic. 

— The six-week rally ending on cue Sept. 17 (S for short) and has retraced a 62% setback to, ironically, the top of the range on Aug. 12 that was later exceeded to continue the six-week rally. The retracement that occurred on Tuesday occurs after USDA “found” 200 million bushels (Feed & Residual) of old-crop corn, setting the stage for another “find” in an adjustment looking forward to 2025-26 marketing year for F&R that looks too high as well.

So, while we anticipate a November WASDE where we want a downward revision in corn and maybe beans to help us out until we get that deal with China, one has to ask himself what kind — if any — deal is in the offing that will dictate that corn will earn the carry from now until July, referenced above. 

I am doing my due diligence regarding replacing sold corn with long calls and exiting the short July call options I sold for the premium while waiting for information/market signals that corn is attractive enough to exceed July highs. If there is such an event, then I shouldn’t be the only one impressed, and the price should reflect a newfound glorious outlook. The test of the 62% retracement is potentially the key, below which the downside is not complete yet. Tariffs don’t necessarily change the demand pie but could change our share, as we just rearrange the global marketplace to our benefit, or not!

Jerry Gulke can be reached at (707) 365-0601 or by email at Jerry@gulkegroup.com