Today is one of those days [years from now] when you will look back and remember history changing. The USDA did not drag their feet on reducing yields, they dropped corn to 155.8 and surprising lower bean yields to 44.4. The tone of the market is short crops get smaller and the January report will adjust the stocks levels we saw last week.
The market tone is very confident now, we will see lead month corn above $5 all the way to October of next year when new crop corn comes on board. The big question everybody is now asking is how high does the market have to go to ration usage. All eyes will be on how exports react next week and ethanol production statistics. If there is only a modest drop confidence will be extremely high that lead month futures in corn will have to test the $6 level and wheat will have to move up to $12. The wheat complex has the weakest fundamentals to rally but will be pulled up. Just keep it in the back in your mind, wheat should be the first commodity to break its downtrend support.
The reaction is also going to be immediate on the livestock complex. With corn and meal prices taking off, all talk of expansion of herd stock is going to come to a screeching halt. The only issue I don’t know is how much feed coverage got done on the Friday or Monday price dips. I believe there was a lot of talking going on but limited action. We will see. If the end users got covered then prices could actually go higher than expected to ration usage.
You all know my mantra “love the bear”. However right now, I am in hibernation waiting for the bullish storm to blow itself out.
If you have sold cash and want to reown I like selling puts or buying vertical calls. If short futures I like converting to a long put or buying call protection for what could be 9 months of fireworks.
As for new selling on our internet copy comments today we put out an alert to pull all short orders for now. We want to see if Dec 2011 corn can test $5.50 and Nov 2011 beans can test $12 before we start a limited cash flow risk buying campaign.
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