Outside markets dominate the grain markets!
Oct 24, 2008
Outside markets continue to dominate the trend of all commodities. Continued weakness in the stock market is acting like a domino effect. As it moves lower, more money continues to be pulled out of hedging funds. This forces funds to sell more stock which drives the market lower. All this week it’s been about the global slow down and potential negative impacts on demand.
The corn and bean markets where off sharply on project (A) on concern about continued global credit liquidity. The beans had a significant bounce off the overnight lows and actually went positive, but you could sense it was not a rally that had a lot of staying power.
As for the corn harvest, it is moving slower than many would like. A lot of the Western producers are starting to see ponding in the fields and are concerned that harvest delays could start to develop. Normally, this would be very positive but again the negative influence of the outside markets has kept pressure on the market.
Corn and beans will have difficulty moving higher until we get past the November USDA Supply and Demand report and confirm no further bearish concerns. Second, the bin doors shut which we know will occur by Thanksgiving. And finally, the stock market starts to see a reduction in it’s current volatility and becomes more comfortable with the belief the lows have been confirmed. We don’t necessarily have to rally; we simply have to stop going lower!
Current action: Feed buyers should be looking at getting started on next year’s feed needs. Start looking very hard at July 2009 corn between $4.10 and $3.80 for a six-month supply. As for soybean meal, one has to believe we are nearing value levels but I would not be as aggressive—locking up more than 4 months supply is about as strong as I want to be. My long term concerns continue to be a big acreage increase in beans.
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