I’m a Supply Bear!
Mar 22, 2010
This week should be dominated by two primary factors—time and anticipation.
Another week has passed and little field work has been done. Rain and snow continue to fall and producers are starting to get concerned. Granted, it’s still early, but every producer knows that a lot of fall field work did not get done and time is going to be very precious this spring.
The other factor that should have some bearing on the markets is the impact of several advisory services publishing spring guesses with regard to the March prospective plantings report due at the end of the month. The numbers are from a low of 88.4 million acres to a high of 90.1 million acres. I think we will see larger planted acreage figures “IF” farmers get the opportunity to plant. It has to be noted that demand is going to grow as we move through 2010. The increase in ethanol demand and potential increase in exports to China have the potential to drive usage up to the 13.2 billion bushel to 13.3 billion bushel level.
IMPLICATIONS: I’m a supply bear, but still very concerned about this spring and summer weather potential merging with prospects of growing demand. This all implies that producers who follow our selling strategies and recommendations in April need to be defensive in upside risk exposure in June and July. I suggest focusing on developing a limited cash flow exposure position if $4.15 to $4.25 December corn is seen in April or May. Once we get closer to the late July to early August time period, roll the long put position into a short futures or cash position once we are comfortable with the yield prospects.
Again, I suggest being a strong spring seller, but with a close eye on upside risk exposure. The markets could be very volatile, which many times is a producer’s biggest frustration.
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