Old Crop Beans Take the Lead
Jun 11, 2009
The bears could not keep the corn market down for more than one day. In fact, the bean market has erased and made new contract highs. I remember a saying that if the market closes near its high on Friday, you can be bearish for Monday! Old crop beans are leading the charge, as one would expect now that we know that carryover is at 110 and more than likely tighter, which forces the market to start rationing usage until new crop comes on board. Essentially, that’s three months away. The only beans I’m worried about are the South American beans that are being held by farmers. One would think if they are going to sell they would do it by mid-August.
As for corn, the market has recovered a lot of yesterday’s losses but has not been able to make new highs. The corn market seems to want to talk about how bullish things could be, but no one is really excited about buying it at the current values. It seems we will need two more events to occur before we get that final price assault. First, we have to keep pressure on the dollar. Second, we must confirm planted acres down in the end-of-month acreage report. My suggestion is that anybody needing to sell inventory or looking to protect prices for the expected seasonal decline from July into harvest should be looking hard at pricing after the acreage report but before the July USDA Supply and Demand report.
A special note for hog producers: It does not look good. I see two troubling factors for your future. The potential for feed prices to rally from this fall to next spring is quite high. While it will not be as bad as 2008, it will seem like it. The second factor which could be even more bearish is if the swine flu (H1N1) pandemic comes back like it did in the 1919 outbreak. If we have a rash of outbreaks in the Midwest this fall, I would not be surprised to see export buyers of pork product extend their ban on U.S. pork products. So with weak demand and higher feed prices, there is only one thing we will see in the hog industry: herd liquidation. Anybody remember the fall of 1998?
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