My thoughts prior to tomorrow’s report!
Mar 30, 2009
There is a lot happening today. The stock market was down hard on General Motor’s problems and continued talk of the negative impact on the general economy. While this was interesting, the real news was in the dollar. It jumped hard today. In light of all the government spending one would wonder "why?" The only explanation I’m hearing is the world economy is much weaker than expected and is dropping fast. The G-20 meeting coming up next week seems to be signaling they don’t want to inflate like the U.S. government is doing right now. Bottom line, implication is even if the U.S. economy is close to a bottom we can really go no where if the world economy is sliding deeper into a global deflationary pattern.
I would also note we saw big drops in the energy market. December gasoline was down a remarkable 7.2% at $133.94. The realization is starting to take place that global demand for oil is not going to come back quickly. In fact I would not be surprised if the heads tonight on CNBC start talking about the potential of lead month going back below $40.
So what do this mean for grains and meats? If the stock market continues to lose ground it means that demand is going to be slow on the recovery for domestic usage. As for exports the stronger dollar does not help. So the end game is now all about planted acres, weather and finally yield. The concern now is about wet and cold conditions. While this may help to keep prices up into April, I’m confident if producers are given a chance they will get the corn and acres planted.
Going into tomorrow’s report I’m mentally prepared for 83 million corn acres so I have all my short positions in a defensive mode but ready to take advantage of any price bounce. In regards to beans, we will be at least 80.5 million acres or higher. Again, beans have quickly retreated from the $9 price level. Don’t be surprised if we find support at the winter lows but a recovery now above $9.20 in November beans is going to take a major weather disruption in yields. I would continue to encourage clients to aggressively sell new crop beans up against $9.
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