Grains up on the week!
Mar 16, 2009
The stock market ended the week with a 4-day rally which has not been seen since 2007. This helped to set a positive tone which has infected almost all markets. The big new today was some private industry estimates on planted corn and bean acres. Their seemed to be a general agreement that wheat acres would be down 4% to 5% and bean acres would be up around the 80 million to 81 million level. The big disagreement has to be on corn acres. One service suggested slightly below last year’s planted figures in the 85.5 million acres level where another widely watched group came in with a suggestion of more than 81 million acres. The initial reaction was for December corn to test $4.20 Friday and November beans to break hard $8.19.
I generally agree that bean acres will be around the 80 million to 81 million which implies bean carryover will double even with solid demand from China. I’m becoming a little concerned that there is more interest in planting. This places me solidly in the camp that the acreage report this month will be bearish for corn and beans.
In regards to corn, I have to suggest new crop sellers need to be get some type of floor position in place between $4.20 and $4.52. I would really prefer right now to be a buyer of puts and roll up rather than sell cash and buy a call. The reason for puts rather than futures is simply lower potential cash flow exposure. I would strongly urge you to refrain from selling calls to help pay for the puts until we get into the May to early June time period.
In regards to beans the stocks are as tight as they are going to get. If beans can rally on a 185 million bushel carryover I don’t believe there is a lot of hope for old crop beans. In regards to new crop beans, the test and failure to close above $8.50 is serious. Here again, getting a floor is imperative. If you decide to sell cash, I would not defend upside risk exposure until you see November beans close above $9.40. I just want to sell the cash and be done with it.
Finally, the wheat market continues to be plagued by big supplies. We hoped for an end of March to early April early weather freeze. Since weather has stayed cool and wet the risk of a freeze like last year is dropping fast. Looking long term the only encouragement I have is we are going to plant less acres so one should be getting prepared for a major low prior to harvest this May.
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