Should You Be Thinking About Making a Cash Sale Here?
Sep 06, 2011
With how much prices fell back today, I wanted to address the question of cash sales as many producers have been frantically asking me all day today. To be clear, I continue to believe there is still more room to the upside....BUT we have to honor the fact that "money-flow" and a "risk-off" type mood may pressure the trade. The situation in Europe has the "Big Boys" nervous, gold is surging to new all-time highs and quickly approaching $2,000 per ounce on fears and uncertainty. Crude Oil is under pressure as economic growth in Europe, China and hear at home are all being questioned. Bottom-line, the "outsides" are working against us, while fundamentally the crops seem to only be shrinking. Informa's numbers earlier today didn't help as they estimated corn yields at 151 and soybean yields at 41.5 bushels per acre. Trade took this as bearish and piled on the pressure bringing prices down. Tomorrow could be another story as the brand new released crop condition ratings look to be something the bulls can sink their teeth into. Corn Crop Conditions reported at 52% Good/Excellent compared to last weeks 54% Good/Excellent rating. Last year at this juncture we were at 69% rated Good/Excellent. Soybean Crop Conditions reported at 56% Good/Excellent compared to last weeks 57% Good/Excellent rating. Last year at this juncture we were at 64% rated Good/Excellent.
With the basis at the "Gulf" starting to slip even further on poor export interest, there is some fear that "demand" rather than "yield" may soon start to be more of the focus. Certainly there is no debating the fact that the current USDA yield number will be reduced in the weeks ahead. The question though is starting to linger as to if and when "demand" will start to pick back up. As end-users come to the realization and fear that US corn bushels simply may not be available in the months ahead, many may be tempted to start booking less expensive alternatives such as "feed wheat" now, before supplies become more limited later in the marketing year. This is certainly cause for concern and poses the question as to how US exports will fair in the days and weeks ahead, as cheaper global alternatives seem to be the the only real solution.
I am certainly not expecting a major market set-back solely caused by a reduction in "demand," especially with the USDA crop report slated just four full trading session away (next Monday). I do however believe the "Big Boy's" may be looking to reduce their overall "risk" in several of the commodity markets as more fear and concern over the European Debt situation comes back to the foreground. As I have been saying for weeks, this situation is far from over, and may continue to be a thorn in our side as we try and move to higher ground in the grain and soy markets.
Look for a "risk-off" trading environment to pressure the markets early on, European news will dictate direction this week and may provide us with some excellent buying opportunities!
In conclusion, producers may want to hold off any additional cash sales at this time until the smoke clears and the dust settles. It may become volatile and push the extremes, especially if the European Union falls to pieces. I have no reason to believe we couldn't see a limit up or down move this week. Try to remain calm and ride this storm out. If you would like more in depth help on making some cash sales, or would like to have the ability to call and talk to I or one of our guys at Farm Direction, go ahead and sign-up for my report.
Hope this helps, Thanks
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