Well USDA surprised us all today. With corn acres down 918,000 from March estimates instead of up and bean acres up more than 768,000 acre, the market was caught being too bearish going into the report. The corn market was up limit while the bean market was slightly lower. After the initial shock is over, it will be up to the corn market to prove it can move higher as the bean market trends lower.
December 2010 corn stopped at $3.74 but has potential to move back to the $4 level if any weather problems develop. Subsequently, the market is driving out the bears at exactly the wrong time. Seasonally, the odds are very high we will sell off rather quickly once this bullish news is factored into the market.
Looking forward, the primary two drivers for corn and beans will be the weather (how hot and dry does it get) and what happens in the outside markets. Regardless of our supply situation if demand starts to slip because of concern about global economic health, downside price risk still exists.
So while as a bear I’ve been kicked in the you-know-what area, it’s not changed my resolve. Cash weakness will develop in corn and beans as we move into fall. This rally is one to be used to move upriced cash inventory rather than viewed as a buying window for a major upside price move.
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