Sales Index Key
Excellent sales opportunity 10
Excellent buying opportunity 1
The extremely wet September and October has led to one of the slowest grain harvests on record. In late October, the December corn contract broke through overhead resistance of $4.09, which started talks of $4.50 and higher corn—but the hype quickly stopped.
It's a bull's game for now, but the bear is not dead, he's just wounded.
I know it is hard to be a bear, but the market is rising on fear, not solid demand. The ability to sell 2010 production in the July 2011 contract at $4.60 represents a potentially good return. With fertilizer and fuel costs down, profit margins are as good as they were when corn was higher in 2008. Lock up fertilizer, gas and cash rents and sell the deferred futures.
Once you decide to sell the market for profits, consider three variables:
1) Watch the basis to determine when to convert the futures to a cash sale; 2) Try to keep the short hedge in the month that is going up the slowest in bull markets and in the months that are the weakest when the markets turn down; and 3) Understand that there is a significant cost to hedge-to-arrive or cash contracts. Selling futures gives you the flexibility to take advantage of spread movements, which could be big during the next 12 months.
- Mid-November 2009