Reversal of Market Expectations!
Apr 08, 2011
The supply and demand reports were out today. Pre-report expectations were disappointing and calls were for generally lower price action. The market action was exactly the opposite. In fact, the bean market lead the way higher from the opening even in light of increase supplies coming out of South America. The corn market was lower on the open then rallied strong to make new highs today.
I have to suggest today’s reaction to the reports is a little confusing. It appears many of the traders don’t feel USDA numbers are correct and put more faith in continued delayed plantings and strong demand.
I would have to say the general tone is everybody wants to buy a decent correction prior to mid-May to be in position for a summer weather event. The end user is pushing harder to get control of cash inventory rather than futures which is causing the basis levels to firm nicely in many corn production areas.
Bottomline: It’s going to be all about weather now. If don’t start to see a lot of corn going into the grown by the third week of April the market is going to get very motivated about reduced yield potential and even reduce acreage. I however continue to believe producers need to start getting a floor under a large portion of the 2011 corn and bean production.
My suggestion is you should restrict your selling of cash and futures until late June to early July. If you want to protect profit levels, I would suggest a vertical put spread where you buy at the money puts and then move way out of the money and sell puts to help reduce the cost. I strongly suggest you not sell any calls at this time to help pay for the cost of the put. We will be talking more about this on the Utterback marketing web site where we lay our selling strategy in detail.
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