Listening to What the Market is Telling You
Jul 22, 2011
I continue to worry about how the inexpensive "Black Sea" feed wheat is going to affect US corn sales. You have to believe with Russian feed wheat trading at $75 to $90 less than US corn, exports sales of both US wheat and corn could certainly struggle. With Russia right in the middle of harvest, this inexpensive alternative could simply continue to weigh on global prices. I am just not sure corn has the power or the backing right now to take "both" of these markets to higher ground. On it's own accord, I believe "Corn" would be performing very well, but with wheat continuing to trade at a steep discount, we just cant seem to gain the traction I would have anticipated.
I am starting to think it might take several weeks or even a couple of months before we are able to work through the glut of feed wheat Russia has thrown on the market. I haven't even touched on the fact that we now have reports of ranchers in severals parts of the US starting to work in High Protein "Hard Red Wheat" into feed rations... This is something we certainly need to keep our eye on as we move forward.
Bottom line, we need some type of support in the wheat market before we can run corn prices much higher. I am thinking wheat has support down in the $6.25 to $6.00 range for sure, but a break of that magnitude could pull corn down to around $6.50.
Yesterday's market action was somewhat of a concern to me and has therefore prompted me to ease my bullish corn rating back just a touch. As you know, I prefer to listen to the "markets" rather than the other analysts, and from where I sit, the markets are struggling to digest extremely bullish news. We had very strong "outside" market action yesterday, right along with one of the hottest periods ever recorded for corn pollination, and the market struggled to find direction. This isn't what we want to see. I have to admit that makes me a little more apprehensive, and I am starting to think this run might take some time to play out. With that being said, I am going to trade extremely small, still only from the bullish side, and continue to be selectively only buying on the deep breaks. I would urge you to follow a similar logic.
I definitely want to be long, as I seriously doubt the yields or harvested acres are going to be there when the smoke clears and dust settles. I am simply not good enough to try and play the short-term swings, therefore I continue to believe you have to stay bullish in small doses.
With absolutely no clear vision as to what cards the USDA will deal out of the deck in the August report, I urge everyone who is long to make sure you are in a position where you can weather the storm. We might not see any real meaningful numbers or the extent of the damages until the September 12th report...holding on until then could get painful if you are over leveraged.
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