Producers Continue To Let-It-Ride
Sep 24, 2012
Looking forward, there is no doubt the US "weather market" is behind us. The market however is now trying to accurately define "SUPPLY." Once that number becomes more clear, and not a moment sooner, we will start to focus on the "DEMAND" side of the equation. You have to believe any bushels the farmer locks away and stores are going to be tough to buy back. With this in mind, "IF" new highs are to occur, I have to believe it happens out in the FEB, MAR, APR, MAY time frame. The recipe for $20 beans and or $9 plus corn will need the following ingredients:
- Weather problems in South America.
- Strong enough demand to force the US to literally run out of soybeans.
- Outside market help. Continued monetary easing by the worlds central banks and some stabilization in economic global growth.
- Limited downside pressure in Crude Oil. We need positive biofuel margins to help ensure strong global demand.
Any combination will work. Simply stated, if we draw these four cards it will be like holding four aces. Sure there are a couple of "wild-cards" out there that could help make the hand as well, but from my perspective these are the four cards we are looking for. Come up with just one or even a pair and it might not be enough to post NEW all-time highs, but it will be enough to prompt a short-term rally and another opportunity to make more sales. As with any game, timing will also be of the utmost importance. As the clock ticks away and traders see fewer possibilities of this combination of cards being drawn, more and more players may opt to fold their hands. That's why I suggest ONLY gambling with bushels you are comfortable holding until the final flop. Be smart...and recognize that as time passes and the possibilities are eliminated additional premium could be taken out of the markets.
I remain bullish, but keep in mind I have very little risk left on the books. We have made some great cash sales along the way on the rallies and can afford to stay in the game to see the final cards. Producers who have very little marketed have a much tougher decision. Continuing to "let-it-ride" so to speak could be extremely painful if we don't draw a single "Ace," as identified up above. I like the thought of pulling some "chips" off the table and cashing them in rather than pressing your luck.
My rec's for producers remain the same as they have been the past several weeks:
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