Grain markets down with break below 7000!
Mar 02, 2009
Just got back in the office after spending time with producers at the Commodity Classic and my staff members suggested that today’s sharp selloff might be the trend associated with me being back in the office and maybe I should leave again! As you mostly know already the corn complex was weaker from the opening bell. The big negative was the Dow’s ability to break below 7,000. Fear is growing that the government is not effectively putting the breaks on the bank and insurance company melt down. In fact, the problems are getting even more dangerous in the international market. Essentially, everyone is bulling in their bullish horns and putting their money in their pocket. Granted, this could build up savings and when consumers get more confident you could see a respectable bounce in outside market forces.
Other news that’s getting farmers’ attention is the Obama administration's budget which essentially takes away government payments from all full-time farmers. This coupled with the increase in tax rates is really going to put pressure on all business concerns.
Last weeks’ USDA commodity forum suggested wheat acres could be down at least 5 million acres. The acres were going to be essentially divided between corn and beans. Along with cotton acreage reduction, the attitude that’s developing is that the market does not have to buy acres. Yes, you read it right, the market does not have to go higher to buy acres this year. In fact, we really need to plant LESS acres!
Finally, the situation of producers having too many bushels of unpriced inventory on hand continues to concern us. We should get a little dumping of inventory now but I fear we are going to see a lot of the inventory held all the way into summer. If we don’t have some type of weather event it could get really brutal in early fall trading.
In summary: things are about as bearish as one could expect.Right now the trader is trying to buy dips in the hope the market is getting too negative. I’m concerned that limited upside activity can really be seen in the corn complex until we get past next week’s USDA Supply and Demand report.
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