Friday’s market action was weaker across the board for the grains. The wheat market, after an impressive up week, gave back and closed lower. This took the pressure off corn and allowed corn to lose ground as well. While beans were lower, they appeared to fight the decline. February oil has stabilized above $42, while lead month January (which is still under significant pressure) was below $34; so much for the reduction of daily production by OPEC to raise prices. It’s obvious right now that global demand is still declining at a faster pace. While it is good news for the consumer, we would caution all producers who buy product to start thinking about long-term “sit and hold” crude oil positions once a solid technical buy signal is given.
As we enter a short holiday week we must point out that volume could be limited. This could possibly lead to some significant volatility for grains to the downside since they are essentially over-bought at this time. Producers looking to buy for the spring and summer time period should look for a solid correction by the last week of December and into the first week of January.
Long-term our strategy is essentially unchanged. We are very concerned about the global economic recession. Its impact on demand is expected to be more bearish than on a reduction in supply. This is not a year to take a lot of risk. We encourage producers to focus on getting a solid floor under the November beans around $8 to $8.50 cash and December corn around the $4.25 to $4.50 cash level. Once in position, we would suggest defending against weather problems as we move into the May time period with an upside technical breakout.
Bottom Line: If anyone has a problem selling because of last year’s high prices, we encourage them to look at history; when have we seen back-to-back bullish years? We believe the 1972/1973 pattern is all one can point to. A more common pattern: the year after a bull market is almost always an opposite trend because usage begins to be rationed and it historically takes a long time to recover.
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THE RECOMMENDATIONS AND OPINIONS CONTAINED HEREIN ARE BASED ON INFORMATION FROM SOURCES BELIEVED TO BE RELIABLE. HOWEVER, THAT INFORMATION MAY BE INCOMPLETE AND UNVERIFIED. THERE ARE NUMEROUS FACTORS THAT CAN AFFECT THE MARKETS THAT CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF THIS EMAIL, AND RECOMMENDATIONS OR OPINIONS CONTAINED THEREIN. THOSE FOLLOWING THESE RECOMMENDATIONS/OPINIONS DO SO AT THEIR OWN RISK. THE FIRM AND/OR CUSTOMERS OF THE FIRM MAY TAKE A POSITION THAT MAY BE INCONSISTENT WITH THE RECOMMENDATIONS AND OPTIONS CONTAINED HEREIN. ANY RECOMMENDATION/OPINION DOES NOT CONSTITUTE AN OFFER TO BUY OR SELL OR THE SOLICITATION OF ANY OFFER TO BUY OR SELL ANY COMMODITY INTEREST. COMMODITY TRADING INVOLVES RISKS, AND YOU SHOULD FULLY UNDERSTAND THOSE RISKS BEFORE TRADING.