Sideways trading prior to the long holiday!
Aug 27, 2008
Right now, the foundation of the bulls’ argument is the crop is behind schedule and very sensitive to a potential fall yield decline. This week’s crop conditions have indicated the crop is starting to drop, which should be expected at this time but not as fast as the bulls need to keep the market concerns alive. Also noted is the weather out looks that the first half of September is going to be warmer than normal. This has helped to quail the concern above frost. The concern about dry conditions persists but the potential for rain coming up Mississippi valley is still high. Finally, with a long holiday weekend coming up many traders are deciding early to take a break and move to the sidelines.
Overall, the corn and bean market looks on the defensive. While there still is the potential to bounce in September it’s appears it’s going to be a lot quieter than we feared less than a week ago. I would suggest all long traders in beans and corn have a definite plan on handling some bullish disappointment between Sept. 15 and Oct. 15 if no weather concerns develop.
Essentially, if you are long right now you should be in a limited risk buying strategy.
As for sellers, I’m still of the opinion the market will stabilize and rebound nicely as we move into Dec to Feb. The real risk is going to be for producers who must sell off the combine and do not have inventory priced or basis locked up.
In both cases I would suggest a retest of the $6.20 level for Dec. corn and $14 for beans should be used get moved what needs to be done.
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