Soybeans continue higher on inventory concerns.
May 21, 2009
Overall the market was rather quiet today. It’s a normal pattern that develops as the holiday’s get near. Traders decided to move to the sidelines and take a long weekend break. The issue however is will the trade cooperate.
As we all know, the weather is having a big impact on corn planting progress in the eastern Corn Belt. The weather service we work with is suggesting a weather pattern may develop for the holiday which is exactly what the corn market is not wanting. If we come in the market Tuesday and we have delayed corn planting, it’s going to be bullish. Equally, if the rains tend to miss the eastern Corn Belt and the dry pattern currently forecasted for June materializes, one could say this weeks highs will hold for a while based upon weather.
If this was the only issue facing the corn and bean market I would have to say the highs are in. but there are two other big factors at work. First, the old crop beans are tight and getting tighter. End users are getting scared and buying faster than normal. There is talk starting to surface that eventually old crop inventory could go tighter than 60 million bushels. That’s actually below pipeline levels and would cause major price rationing. The net result is old crop beans “pulls wheat and corn up as well” due to the strategy of traders wanting to buy cheap commodities.
Finally, the other big factor that’s keeping things interesting is the value of the dollar. If banking problems continue to persist and we start seeing problems with credit card defaults, commercial loan defaults and regional banks, the demand for Fed intervention will increase. Finally, the financial crisis in the state budgets is going to explode this fall. How far will the federal government go towards putting money at the problem? The more they borrow today the worst the impact on the value of the dollar and more motivation for owners of dollar to buy things rather than hold currency.
My expectation is old crop beans could stay very firm into August while new crop corn and beans actually start to fall after early July into fall.
If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at firstname.lastname@example.org or email@example.com. Tomorrow we will talk a little about the bonds, gold and crude oil.
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