CORN traders will be positioning ahead of tomorrow’s USDA report. Most inside the trade are thinking corn ending stocks move higher as ethanol demand faces serious concerns. POET made a formal announcement that it will idle production at three plants and will delay the opening of a new plant. Collectively the cutbacks are thought to amount to the loss of 330 million gallons of ethanol or about 110 million bushels of corn demand on an annualized basis. Bottom line, as I’ve been saying for weeks, plants are going to close and corn demand is going to be heavily questioned. I suspect the USDA takes a tiered approach towards reducing demand, meaning they probably don’t cut the demand all at once but rather trim -50 to -100 million bushels as we take steps forward and learn more. Bulls are hoping tomorrow’s heavily anticipated oil meeting between the Saudi’s and Russian’s will bring about a cut in total production and help support oil prices. As a spec, I’m now holding a small bullish position. I’m thinking U.S. acres aren’t going to be as large as the USDA is forecasting. Weather is cooperative for the moment but the forecast looks a bit rough into mid-April. I’m also not sure all of the financing and inputs are going to be in place to plant +97 million corn acres. Bottom line, I fully understand the bearish demand headlines and burdensome balance sheet currently being forecast. As a bull, I’m hoping crude oil can find some stability sooner rather than later, livestock feed demand and exports strengthen and U.S. weather uncertainties might eventually attract some bullish bets. I know that’s a lot to hope for but I think a lot of the bearish news might soon be all cooked into price. As a spec, I will be looking to add a bit more length on the next leg lower. As a producer, I’ve slowly started to scale out of some longer-term hedges. Those with old-crop contracts in the front-end, rather than paying to roll forward, might want to think about simply selling the cash and re-owning the board in some capacity.
