Corn and soybean outlook
Jan 05, 2009
Corn and wheat are weaker today, while beans hold on to gains. We would not be surprised to see a continuation of this tone for the week.
Two primary bearish factors should be coming into play on corn now. First, exports should continue to be weak and the expectation is still quite high that the January USDA Supply and Demand report will be bearish and eventually stocks are going to grow. Second, we are getting close to the time period where producers need cash flow. Roads are in decent shape in the Midwest allowing winter grain movement. Between now and early July the mid-January to early-February time period will be the most bearish time period for corn. If you have inventory to move in the next 60 days, we would do it now. If you can hold and wait until summer we would do so at this time.
As for beans we continue to argue the complete opposite pattern. Exports are decent and the upcoming January USDA Supply and Demand report and final production numbers are expected to be positive. We should see the tightest stock numbers for the year in the next 60 days. After that, we fear beans will be fighting constantly to hold gains as producers shift big acres to beans. While we could bounce in the summer if a weather event occurs, the extent of the rally will be 100% related to weather. We continue to suggest that both old and new crop sales must be aggressively placed at current levels. We like selling old crop in the cash market and new crop as well in a forward cash contract where basis is locked up. We would only suggest defending upside risk exposure if we see a clear technical breakout to the upside after early April. At that time we suggest a very aggressive selective futures buying strategy or a straight long call strategy.
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