Commodities Took it on the Chin Today!
Jul 08, 2009
The entire commodity complex took it on the chin today. As for the ag markets, old crop bean contracts were the big losers. It was obvious that a lot of traders are getting out of the way before Friday’s report. I don’t see anything major that can hurt their positions, it is just that there is little new information that can squeeze the spread. With the basis market breaking on old crop beans, many cash players are suggesting that the market is now prepared to wait to new crop.
The country seems to be saying very loudly that the corn crop is no where as good as the crop conditions rating would suggest. Second, they don’t believe the crops out there. Finally, while some inventory has to moved into the market, they appear to be getting ready to sit and hold if prices move much lower.
So the name of the game right now is to sit and wait. Wait to see if we get a bearish report and bullish reaction. Wait to see if yield can be hurt by an August weather event. Wait to see if demand can rebound.
Summary: The burden is still on the bull to prove his point. I feel a 10% price bounce to work off the oversold condition is possible but overall the seasonally pattern strongly favors sideways to lower price action at least into the August USDA Supply and Demand report time period.
Hold short positions and don’t be in a hurry to start accumulating major long positions until we get closer to the first of August.
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