Discussions center on crop progress
May 26, 2009
Talk today was about how much corn and bean plantings were done in the eastern Corn Belt. Whatever number they come up with tonight you can be safe in assuming more rather than less is done. Equally, most producers are getting very close to finishing up with corn planting. If they don’t get it planted by the end of the month most are saying they are going to move to beans.
The dollar was stronger today because of government intervention. We are seeing a lot of bond offerings this week. Once they are over, the bias of the trade is for the dollar to resume its downtrend. This is becoming a serious concern for the grain bears. Even if we reduce the weather event, the potential of a lower dollar could really influence the exporters buying habits.
Finally, most of my brokerage activity today has been in working with clients on defending upside risk exposure of the bean complex. I have been bullish to the old crop for some time and now it appears after the little profit taking things could get exciting again. The potential for the June USDA Supply and Demand report to reduce old crop bean inventory below 100 million bushels is serious. Along with reductions in the South American crop, the old crop situation is becoming dangerous on a global basis. The net impact is the bulls could really push the market between mid-June to early August in the old crop beans. The implication is the bulls spreads will dominate. As one brokerage account asked what happens when the play is over, how violent of a reaction will there be? The obvious answer is if everybody gets in late it could be significant. However, for now I believe the old crop/new crop bean spreads are about the most profitable play on the table.
If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at firstname.lastname@example.org or email@example.com. Tomorrow we will talk a little about the bonds, gold and crude oil.
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