Stock market decline, bounce in grains
Sep 17, 2008
The decline in the stock market continues today, down at one point over 300 points. While AIG was bailed out, the concern continues to grow that more firms will eventually fall on hard times and the Fed will not bail them out too. This has pushed a lot of money into the gold market. It’s up now over $60 dollars which is an explosion for this commodity. I would not suggest this level of strength can hold once the short term panic buying ends.
At the same time we saw the crude bounce off the bottom up around $94. Everybody was talking about $80 to $85 but it was more wishful thinking rather than real potential. I’m tempted to say the rally in the outside market is more a flight of capital to investments which are perceived will hold value rather than any major bullish demand bounce.
Never the less, the rally in the outside markets and ability to bounce off the lows has allowed corn and beans to bounce when they were on the edge of going sharply lower. One needs to be focused on getting long the market between now and the October USDA Supply and Demand report.
Long-term I would suggest cotton, hogs, and wheat are on my strong buy list. Corn is neutral and should only be bought on corrections. In regards to beans I don’t want anything to do with the long side of the market. My primary focus will be on selling the November 2009 beans on any rally that gives producers in excess of $10 cash off the combine because of my expectation of a sharp jump in acres domestically and internationally in demand tone that will be stagnant at best. If you get the cash sold and you still want the potential of a price advance I would strongly suggest buying a vertical call strategy over long futures.
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