While many are bearish, some analysts expect a market bounce
"Going forward, we will start to see the market move higher."
Crops might look fine from the road, but when flying above the corn fields of Iowa and southern Minnesota, a different production scenario starts to take shape. Pounding rain, saturated soil, late planting and then "mudding it in" led to lots of problems, says Brian Grete, Pro Farmer market analyst. Despite all the chatter about $4 and $4.50 corn, Mike Florez of Florez Trading says farmers have 10 reasons to be bullish.
China is buying corn, wheat and soybeans at a hurried pace. "China’s traders are known as the best in the business," Florez says. "So why would they be buying at this pace if they thought prices would be lower in the future."
The corn crop might be getting through pollination in great shape, but the crop is three weeks late. This means the crop will have to receive its first frost later than normal to avoid yield losses.
"There’s no way that we have 98 million acres of corn out there, especially with all the reports of huge prevented planting applications coming from so many areas," Florez explains.
The hedge funds have a record short wheat position and a bigger short in corn since 2006. "If they get even that, it could result in a significant rally," he says.
Private wheat production estimates from China, Russia, India and Argentina are all much below USDA’s estimate, Florez says, noting that stocks are much tighter than they appear.
- September 2013