Charts & Hedging
Ron was educated as a mathematics teacher, trained as a land use economist and has been involved with trading futures for more than 20 years.
Sep 12, 2010
Corn: A great long while ago, or so it seems, I noted that technically corn could manage the $5.12 region. It seemed pretty far fetched at the time, and no one, myself included, expected to see it happen this year. But now the magnet pulling prices up is at $5.23. That definitely puts 512 in the realm of possibility. In the meantime, funds are longer and commercials shorter than last week. How short and how long? Shorter than anytime in the past 10 years, and as long as in 2007. If we pretend like 2011 will follow 2008, which we certainly should not count on, corn prices basis the lead month will get to 520 +/-, drop to 370, then rise to 775. That’s if I look at continuous chart style A. On style B, prices will rise to a bit above 800. What does all this boil down to? First, it looks like prices are likely to rise to between $5 and $5.25. Second, they are then likely to drop by about $1.50. Third comes next year’s growing & harvest seasons. Remember, there is only one way for farmers to get $8.00/bu for the crop, & that is to have a crappy crop year. High price silver linings usually come from nasty, black clouds in the form of lousy crops
Wheat: Technically, the next wave of selling should take prices down to 540 +/-. Where was the first wave of selling? How about the drop from 874 to 678? I’m a bit skeptical as to whether we will see enough wheat produced outside Europe and China to send prices down to 540, but we shall see. I cannot imagine that next year will have such a bumper crop that it keeps prices from moving at least to $9.00, but let’s see how this all sorts out over the next few months.
Beans: The bean chart certainly looks nothing like wheat or corn. This year’s high is pretty much the same as last year’s. The funds are a little bit longer this year, and the commercials a little bit shorter than in 2009. All we can predict/estimate/guess is that prices will come down a couple of bucks, to just under $9, then next year’s planting, growing and harvest seasons will happen. If corn hits $8, then we might reasonably expect beans to manage at least $13. A major drought in Brazil and Argentina would change that, of course, as would huge bumper crops. But just now all I can say is $9 to $11 beans next year, as we had this year. You don’t believe that? Neither do I, but that’s still the most that can be said at this time.