Tough for position traders but great for day traders!
Jun 25, 2008
The market has now adjusted from an overbought situation. Some of the bulls have taken profits on both corn and beans. The trade is now awaiting more solid update of planted acres and yields and it is going to be disappointed with the USDA June Acreage report. Add to this that the corn and bean crop are generally looking better from the road and it will be difficult for the market to rally in July. The only wild card now is if Congress would start to act to restrict speculative investment.
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There is growing concern that politicians are looking for somebody to blame for higher corn and fuel prices, instead of looking at themselves and our insane national energy policy. The big long speculative funds in the market are getting the blame for high prices and Congress will eventually do something due to public pressure. The answer is simple; to get prices long-term lower we have to raise prices to such a high level that usage will be rationed and investors will be motivated to find new sources of energy due to high profits. The problem is who’s going to get elected on a strategy of short- term pain for long-term benefit.
Overall, I expect price trends to continue to be a short-term high between now and early July and a sideways to choppy affair for most of July to early August. This makes great markets for day traders but a difficult job for position traders.
Corn will be the dominant commodity between August to early next year to rally. Bottom line: I like being long corn via short puts, long calls or long futures. In regards to beans, my convictions are not as strong. I see the potential of larger acres being bearish but potential for yields closer to 40 bu. being bullish. When I sum it up I don’t believe we can go to $20 on current fundamentals but neither can we get below $10. This implies to me producers would be better off taking the $15 beans and lay off risk to the upside with a 4 to 5 vertical and being done with beans.