Are we now going lower in corn?
Sep 02, 2008
The market has come back from the holiday ready to feed on the bull. It’s done a good job today in all the grains of putting the bull back on the defensive. Sharply lower crude oil values have helped put pressure on the bean complex. We were off more than 65 cents today which also put pressure on the corn complex which was almost down limit.
So the question has to be asked: Is this bearishness justified, and are we now going lower? It’s a simple question but very difficult to answer in a black or white. My first shot at the question is to say I’m a corn bull after the combines start to run and get increasing more bullish as we move into next year and the market has to buy acres due to higher input cost. If I had really deep pockets right now I would start buying December 2009 at $6.05 and buy a unit every 5 cents lower, please note this is what we will be doing on the internet copy.
The problem I have with being a bull today is I can’t prove the corn crop is not out there. With crude oil down and rain coming, the bears are pushing the bulls out. The critical issue now becomes will we see a decisive move to the sidelines of the large speculators. I believe they have enough cash flow to survive the market and are committed to long term ownership. Therefore, I believe they will be scale down buyers rather than liquidators of positions. This essentially takes some of the steam out of the downside argument.
Summary: Near term corn is going to be under pressure. The lowest price action could easily be seen in the month of September. If you have to sell off the combine you should not allow December 2008 corn to move below $5.50.
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