How do you lose 11% of your corn stocks?

Corn just got cheap. Well, at least relatively speaking. After months of prices edging higher on increasingly dismal stock and planting reports, investors got quite a shock today when a monthly report indicated that corn stocks were 11% larger than expected, and corn sowing was 2% above what analysts had predicted. All of a sudden, the fear of no supply pushing prices higher evaporated, and corn tanked quickly, falling -10.89% (the second largest corn move in history from what we can tell).

But corn wasn’t the only grain in freefall. Wheat also took a dive after planting reports came in over 2% above predictions, and stockpiles were found to be over 4% larger than expected.

So, is this just fuzzy math used to taunt investors? How do you randomly forget about over a tenth of the corn stockpiles in the country? U.S. Agriculture Secretary Tom Vilsack had a different take on the situation.

“American producers stepped up,” he quipped.

But did they? It turns out that the data released today in the plantings report was collected as part of a survey in the first two weeks of June that asked farmers what they believed they would plant. In other words, they asked farmers, when corn was hitting all-time highs and before the plains got pounded by flooding, what they intended to plant. When this information came out later in the day, the USDA quickly turned around and said they would be repeating the planting survey in July, perhaps causing the small bounce back at the end of the day in prices.

Actually, you should probably get used to the idea of these numbers being pretty bad. If you read the fine print at the bottom of the reports, you’ll find that that large change in wheat stocks actually falls within the reports margin of error, and that farmers have up to 5 years to change their answers on the surveys. Yes, this mash-up of crystal ball-derived statistical predictions is the report that caused a 10% price drop.

Whether it’s increased planting gusto or USDA miscalculations isn’t really all that interesting to us, as we’re more interested in who does and does not have exposure to the move in the managed futures world. Some longer term programs we monitor, such as Covenant Capital and DMH,  are maintaining their long positions in grains, but a few are taking advantage of the downturn, like Clarke Capital (including Worldwide, whose current drawdown presents an excellent opportunity for some investors), APA Strategic Diversification and Lenapi Advisors. Interested in learning more about these programs? Click on the links above to view their performance.

Write a Comment

The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.