On my way to Commodity Classic!
Feb 25, 2009
I’m on my way to the Commodity Classic and hope to see you there. My expectations for this week—I’m going to see a lot of concerned individuals. It’s growing very apparent that producers are sitting on a lot of inventory and are hoping for a rally.
Yesterday corn broke back to support and held while beans were quiet. Today the market was down on the open for both and up strong into the close. I would not be surprised to see an evening up by the trade as we move into March’s USDA Supply and Demand report. I still believe there are still a lot of problems in regards to the banks that must still be resolved before we see a solid bottom to the outside markets.
So what does it mean to producers? I continue to want to propose that corn could have some price recovery because of acreage reduction and spring planting delay. I want to cautiously buy December corn and be satisfied with 30-cent rally. The real issue becomes when to price old and new crop corn. First, I must suggest on old crop corn you need to be getting the basis locked up. I really fear a lot of old crop corn is being held for a summer rally. Second in regards to new crop corn we need to be honest. The potential of December corn getting back above $4.50 is very low and will only happen if we see some type of major weather event. Therefore, you need to be selling inventory based upon time and price. I know you are not going to like it but incremental selling in early April and through June is recommend.
In regards to beans I’m hearing some very interesting developments. When clients look at corn vs. beans in regards to crop insurance they are seeing that they can make money with beans but they still have to have a serious flat price move to make money in corn.
If this pattern persists, we could confirm more than expected bean acres in this year simply due to the financial uncertainty everybody is experiencing. Therefore, the tone of the bean market I believe has limited upside rally. The only thing left right now is if the Argentina’s crop is confirmed smaller than anticipated along with a dock strike. I would be actively using any type of rally say 20 to 30 cents to get both old and new crop sales cleaned up!
Bottom line: Now is not a time to take major risk with operation. I urge you to cover your costs and get through this year, granted we may not make a lot but we at least keep our books in the black unlike many industries right now that are bleeding a lot of red ink!
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at firstname.lastname@example.org or email@example.com.
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