Grains recover after yesterday’s correction
Jun 04, 2009
I sort of hoped yesterday’s correction would extend a little further before next week’s USDA Supply and Demand report. The market, however, had other ideas. The market opened firm from project (a) price recovery and then hit the gas in mid-session. Beans were the leading commodity, with old crop beans being the dominant player, up almost 43 cents. Corn and wheat quickly followed the lead of beans and moved up nicely today.
As I’ve been discussing with several of our brokerage clients over the last few days, the big price swings in grains I would suggest are more to do with outside markets than with the current fundamentals of grains and oilseeds. Fear is growing that the dollar will continue to decline and inflation is going to take off. This is triggering many investors on a global basis to look at the commodities as a very attractive way to participate. The dollar was weak today and the oils were stronger.
My bias is even if we are going to see a lower dollar in next year and higher energy values, we are due for a break. The charts are set up for a excellent double top formation to be made in June. I’m arguing that the dollar will start to stabilize for a few months and the oil will crest. Since the outside markets will not be pushing the grains and oilseeds the individual commodity fundamentals will again be the primary focus of the markets direction. My suggestion continues to be strong upside price potential exists for the month of June but as we move into early July the normal seasonal pattern will take over. So for now, all sellers are recommended to keep positions in limited cash flow exposure. We are in no real hurry to sell anything right now until we get into late June to early July.
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