By: Bob Utterback
, Farm Journal
Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.
Weather uncertainty and Tuesday’s acreage report weigh on the market
Jun 24, 2009
We are now down to less than four trading sessions left before the next acreage report. I remember saying back in the winter seminars that we should be preparing ourselves to be taking advantage of any blow off top action to get sells into place by mid-July. Is this still a valid assumption?
As we all know the bulls “infected” me in early June and I got caught up in one more bounce rally into the acreage report. The price direction has been the opposite. The late longs have been caught in all commodities and have seen their bank accounts decline significantly. The issue now is with the sharp sell off all June long, have we removed some of the risk of the seasonal decline into August and September?
I have to say since we have sold almost 73 cents off the June high in December corn and over $1.28 in November beans we have for surely taken some of the shine off corn. The problem is we still have a very large amount of old crop corn to move to the market in August and September.
In the end I believe the major determiner of direction will be the weather, nothing really new for the grain complex, but even more important this year. All I’m hearing from farmers who have been spraying their crops is the crop looks good, just 30 days late. There are plenty of wet spots but nothing more than last year. Our weather man suggests that with the start of a powerful El Niño and low sun spot activity there is cause for concern but he’s not in the camp of an extended dry and hot time period. In fact, he’s more worried about getting enough growing degree days.
All this uncertainty about weather and the outside markets has caused many traders to lose interest in grains at this time. We are developing a consolidation in corn and beans, a close below $4 in December corn and $9.80 in November beans must be considered very bearish after the July USDA Supply and Demand reports. Equally, if the market is able to close the gaps made last week, there will be hope for corn and beans. But frankly, if the weather is not hot and the dollar is dropping limited follow through will be seen.
In summary the market is range bound, but like a spring winding up once it breaks out of the established support or resistance, the movement will be significant and more than likely very violent. Because we are moving into late summer the burden of proof right now is on the bull, all the bear has to do is sit back and wait for harvest pressure.
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