wmeubank@ocp.kcmo.com
COMMODITY RESOURCE CORPORATION
400 South Fourth Street,
Minneapolis, Minnesota
(June 12, 1997) CORN: OUTLOOK--I still feel it is too early to push corn prices much lower at this time. After all, the corn has not even pollinated yet while the market acts like it's already in the bin. There remains very little risk premium in price right now. As I've stated before, the new-crop December forward futures should hold at least 30 cents, but probably more like 45 cents of risk premium. If all goes well, meaning perfect weather throughout the summer, I project harvest lows could be down to $2.25. Add 45 cents and you get $2.70 December corn. Based on this formula $2.50 Dec. corn appears too low. At current prices both old and new crop look to have 20 to 30 cents upside potential, with no more than 10 cents of downside risk.
STRATEGY--HEDGERS: New-crop hedgers have been advised to be up to 40% sold in December futures. Our average price is about $2.75.
Some of you are using the December 270 and 280 puts purchased for under 20 cents. No additional hedges are suggested at this time.
TRADERS: Our previous recommendation to buy December corn at $2.53 or lower was able to be filled. Risk to $2.39 for a minimum objective of $2.70 (or higher if we see weather problems developing).
George Kleinman
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