Grains Bounce on Buying Interest and Outside Markets
Jul 30, 2009
Unexpected strong buying interest by the Chinese, strong crude oil bounce, break in the dollar, rally in the Dow and end of the month position squaring all led to a very strong price event today. I have to say the corn market is rallying only because of the outside markets and will be unable to extend the rally much unless we see solid strength in the outside markets today. July 2010 at $3.75 is starting to reach target prices where I want to sell unpriced grain that’s going to be stored into next year.
I continue to suggest the bulls are using up a lot of energy right now. Since 1970 the March corn contract has rallied up into August and September on weather scare only seven times and then subsequently fell into March. In fact from a historical pattern the strategy of storing corn unpriced and hoping for a rally has only worked 11 out of the last 38 years. So I’m saying right now the odds are better than 75% from a historical prospective that prices are not going to rally. Additionally, if you review the data in the last 38 years, we never saw three back-to-back bullish trending years from the fall lows to next spring. Not since 2007 and 2008 has it been so strong, I truely believe the fundamentals are not exceptional enough on the demand or supply side to argue for a sharp trending year.
Bottom line: Storing corn in the bin unpriced and hoping for a flat price rally historically has less than 1 in 3 chance of paying off. Second, after two bullish years like 2007 and 2008 historically, the market never rallied to make storage pay. These are the historical facts. If you are going to store unpriced, we would rather you dump the corn and buy futures rather than store in the bin unpriced, having all the storage and risk.
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