The bulls rallied this week but what’s next?
Sep 25, 2009
A couple of weeks ago we were talking about the potential a frost this week! As you know the frost did not develop and overall the crop is getting closer to harvest. There is the risk of a frost scare next week but it’s a one-day event and our weather service suggests it will only affect the most northern corn production states.
Overall, this week has been a week where the bulls have rallied the market on concern about frost, concern about disease, concern about increased export sales. I would suggest the corn bulls have used up a lot of energy in getting prices back to the current levels. Once the pressure of harvest starts in about two to three weeks, the market is going to drop back to the old $3.02 low. The issue will be how far below that level will we go? The answer will be determined by exactly how good the crop is and how willing producers are going to store corn.
So far in the states where reports on harvest are coming in, yields have been impressive and well-above historical expectation. I believe this crop is going to get bigger and the demand side of the equation will be pressed hard to meet the USDA expectation currently be suggested.
Continue to expect a long drawn out corn harvest. This will effectively help neutralize us from an extreme November low. I still feel very comfortable in arguing a post harvest bin closing price recovery. The issue that could plague the market after the first of the year is inventory that has to move into the market because of needed cash flow and potential poor storability of the corn crop.
Side note: If you have zero sold for 2010, we would suggest a move back into the $3.90 level would be a decent level to get at least 25% sold. Long term I’m of the opinion that the $4.25 level is going to be tough getting above with carryover levels moving close to 2 billion bushels. Next week we are going to talk a little more about interest rate and fertilizer values. If you have any questions about any issue that you would like discussed in our daily comments please send me an e-mail at firstname.lastname@example.org.
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