Will They Ration Corn? When?
Apr 11, 2011
As I mentioned last week after the USDA decided to leave "Ending Corn Stocks" at 675 million bushels, the trade is now going to be left with the job of rationing demand to ensure such a number is correct. You have to believe the USDA is trying to tell us something and myself and others are beginning to pick up on it. It is fairly obvious the USDA did not want to project ending stocks falling much lower. The great worry is a potential that end users will run out of corn late into the summer. Now I’m not going to go as far to say that, but with China now in the market and ethanol demand staying strong, prices will have to reach a high enough level to curtail the current demand and make some end users take a step back and look in another direction. I continue to remain bullish corn thinking that higher prices will be seen, but I am starting to feel the trade is becoming over crowded, therefore I will be moving one-step closer to the door. I am primarily concerned about managed money flow moving forward, the recent set-back in sugar prices, how it will effect our global ethanol exports, and thoughts of weaker feed usage. There are still too many bullish cards left in the deck to just fold and walk away, but for the first time in a few weeks I am starting to see a few bearish cards being thrown in as well.
I doubt any major sustained set-back will gain long-term traction as of yet with ending stocks this tight and the weather still a major concern, however with prices at these levels, a quick 10-20% price correction could amount to a fair-sized break. Remember this as we move forward, do not get yourself overextended. Price breaks and profit taking could happen in a heartbeat, be extremely cautious as the waters are getting swift and deep... Make certain you have manageable positions, use the rallies to make additional cash sales and the major breaks as re-ownership opportunities. Talk with your advisor for more help on these strategies or give us a call here at 816-322-5300.
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