Outside market concerns and weather are driving the grain market
Jan 20, 2009
Regardless of your politics, one has to be proud of the smooth transition of presidential power from George W. Bush to Barack Obama. We wish the new president wisdom in trying to reign in a serious of major problems he faces. In the end, it’s going to be all about jobs. Jobs need to be at the private sector rather than the public sector. This begs the question how do we motivate private individuals and companies to take risk and employ more people when, if successful, you are only going to have to pay more taxes and handle more paperwork? So again we hope the new administration can help improve the economy so all individuals can improve their economic condition and in general get rid of all the fear I sense around the country.
The commodity that has recently surprised us the most has been corn. We just did not see the magnitude of the rally Friday and on project (a) last night. Last week we posted a low of $3.60 on 1/15, rallied hard on Friday and early last night we posted a high of $4.07 or a 47 cent rally in two trading sessions in January! As we said this was all short covering and some limited speculative buying because of the weather concerns with the Argentina crop and potential dock strikes. Once this short covering rally ended, the corn market had no buyers; the commercials and feed buyers were not interested. Outside market influences were negative. Crude oil was down, gold was down and the dollar was up which for the last several months would have implied very bearish price action. We have also picked up that several leading analyst around the country suggest ethanol demand is going to be significantly lowered. In fact many 2009 projections are now being lowered from the 4.2 billion level down to 3.8 billion. So in summary there are a ton of reasons for the corn market to break into February and we see only one reason for the rally, weather. If we start to see some rains, prices could get really weak fast. That’s why we continue to suggest if you need cash flow and want to sell corn focus on getting it done on this unexpected strength in March corn above $4.
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