The Bulls and Bears…
May 04, 2011
We are now in that no man’s land between the bulls and bears. Both camps are becoming more convinced of their position while lacking the facts to push their cause. The bulls have been in control since last March suggesting the supply side is in peril, demand has not been rationed, and prices have to move to significantly higher levels in order to adequately ration supply. The bear’s argument is just about the opposite. The planters are really going to start running next week. Demand is starting to show some signs of being tired and the market technically is very overbought and due for a correction.
So what’s it all mean? The market is currently focused on the late planting conditions. We are starting to see some solid planting progress in the western states and warm weather is coming to allow planting in the central and eastern Corn Belt as we get into mid-May. The crop will get in and I anticipate a solid cooling off of the market as we move past the May Supply/Demand report next week.
I however must strongly suggest this is not the final curtain call for the bulls. After a solid correction into late May I sense a real desire by the trade to be bullish in June and July. The concern will be that the corn crop will get planted under less than “ideal situation” and will be very sensitive to shallow roots and dry weather stress as we move into pollination. Anybody remember 1988! I would suggest the best chance for a new high in Dec corn will arrive some time after Memorial Day but before the 4th.
Suggestions: Focus on selling Dec corn above $6.75 to $6.85. Be ready to sell July puts or get speculative long on a solid 30 to 50 cent correction going into late May. And finally whatever position you have in place going into June, be prepared for market volatility. If the exchanges increase the daily limits to 50 cents, it could be wild!!
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