Mar 30, 2011
This week we will see the much expected March prospective plantings report and quarterly stocks report. The tone of the corn market -- expect planted acres below 92, but slightly higher stocks. I believe we are going to get more corn acres than expected. The dominant fundamental factors for the next couple of weeks will be how fast corn and soybeans get planted and how demand holds up.
It will be difficult getting corn and soybeans prices back to their winter highs without some weather problems. I expectation is building that we will have an overall normal yields with a few pockets of stress just to make it interesting.
Bottom Line. By the time it’s all over the recent highs in Dec 2011 corn and Nov 2011 soybeans will hold unless we see a significant weather event. I believe producers should be getting close to 60% of their expected corn production priced and 40% of their expected soybean production priced with a plan offering flexibility to sell and benefit if prices move higher. Now is the time the calls bought last fall are paying off. Not only are those who bought calls last fall up a little, but they make it a very easy to sell $6 corn and $13 soybeans. If anyone has not bought calls, I suggest now waiting until after the report and buying on a technical breakout above old highs.
Outside Markets. The unrest in the Mideast should keep the oil market nervous. It’s common knowledge that supplies are adequate and crude oil prices are more appropriate around the mid-80’s, but the market is worried about future supply disruptions. I believe we will see $120 before we see $80 in the next couple of months. This suggests producers need to get their summer fuel needs locked up.
Interest Rates. Major lows were made last fall and on a sideways to higher path. While I believe there will be higher rates, there is tremendous government pressure to keep rates low. The net impact is the longer the government keeps interest rates artificially low, the higher the risk of inflation. I have to suggest that, as we move into the latter part of 2011 to early 2012 the fed will be forced to raise rates a little or really increase the fear of inflationary pressure right as the 2012 presidential election moves into full steam.
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