Q&A: Will Corn Go Higher From Here?
Jun 16, 2011
Client Question & Answer Session
Q: Do you think it is unrealistic to believe July corn could eventually trade to $8.50?
A: No I do not think it is unrealistic that "old-crop" corn reaches $8.50 given the right set of conditions and circumstances. Demand has to stay in tact though, and the "big-money" has to stay in the game. If the big money gets spooked or thinks demand is wavering, then they will exit their long positions and head for the sideline. This wave of heavy sell pressure as they close out their long positions will obviously push prices much lower. What we need are small controlled breaks that encourage "more" demand. This needs to be followed by a stair-stepped rally to higher ground, then start the cycle alll-over again. Any fast explosive move higher would simply cut off "demand" as most would find corn too expensive to pencil. The end-users need time to digest the higher costs and pass along the expense. At this juncture quick explosive moves in either direction will not be conducive for posting new highs. At these extremes, that could be a tall order. As you can see, the higher we trade the more extreme are the moves both up and down. These extreme type breaks could certainly spook the massive number of long positions currently in the trade, and a massive push higher will spook the end-users causing them to look for alternatives to corn or ways to start rationing demand. If your looking to hold me to the fire, then yes, I think we trade to $8.50 at some point later in the sumer, but it is starting to look as if it could be after the July contract expires. Am I willing to bet the whole farm on it? ...No! That is why I continue to preach rewarding the market on moves to higher ground. There are just too many variables that need to fall in place to bet it all.
*I know many of you have moved your sale prices higher and higher during this bull run. You may have started out saying you would pull the trigger and sell if and when the corn market reached the $6.00 mark. Then you moved your sell target up to $6.50 or maybe even $7.00 as we pushed higher. Once we broke those levels, you said $8.00 was the magic number. That strategy has worked well up to this point, but you have to realize at some juncture it will cost you dearly. Need I remind you of the famous Baron Rothschild line..."I made my fortune by selling too soon." Stick to your plan, stick to your plan, stick to your plan... Do not continue to move the finish line. I have made this mistake several times myself in the past, only to find my horse run out of steam as I lengthened the race.
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