By: Bob Utterback
, Farm Journal
Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.
Beans jump; corn light
Dec 22, 2008
Beans were sharply higher on rumors of increasing Chinese purchases. While beans closed higher, they faded off the early highs on concerns that most of the strength was already factored in. Continued dryness in South America was also cited as a supportive factor for beans. Near term, it appears factors are in place to support beans into the January government reports. Our focus will continue to be to encourage long term selling of a large part of 2009 in the November 2009 contract now that we are finally back above $9 and many producers can get well above $8 cash off the combine. We continue to believe acres will be up and major pressure will develop on beans into the fall.
The corn market was very lightly traded today. Since we have half trading days on Wednesday and Friday, we believe many traders are electing to be on the sidelines. Our concern is still quite high there are a lot of producers who have unpriced corn to move for early January delivery. We would not be surprised to see price weakness into the end of year to the first few days of January. It will however be difficult to get corn to break much unless wheat or beans correct. We all know that many of you want to buy a corn break for strength into the spring time. The problem is we are in the middle of the current trading range. If we could get a decent 50% correction in the December 2009 we would be very encouraged to start scale-down buying. This unfortunately implies at least a 25 cent correction. This could be very tough.
Bottom line: We want a correction to buy but expectations are low that we get the correction we want. This implies we are going to be forced to buy on upside technical breakout after the first of year. Subsequently, you are going to have to be either very short term in your holding period or buy defensively. This implies buying of futures on breakouts and then defending with puts if there is no immediate follow though.
Outside markets: It is our expectation that the dollar, crude oil and the equities will continue to cast a big shadow over the commodities next year. The expectation is the dollar is going to continue to drop under pressure of big government bail out spending. While this would normally be quite inflationary, currently it’s being neutralized by the continued slide in the oil market. Currently the deflationary tone will continue to dominate the trend in the market. We don’t really expect inflationary concerns to start to really surface until we are well into the later part of 2009 and more likely well into 2010. This implies buyers need to be cautious, focused and only buy on solid technical breakouts or some other type of technical indicator. Right now the fundamentals of inflation, I believe, have the potential of wearing out a trader before the actual bullish event occurs.
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