Yesterday’s report was bearish, but today’s action is bullish
Dec 12, 2008
After yesterday’s bearish report and bullish reaction there was hope the lows were in. This attitude was very short-lived. We have now essentially erased the gains seen after the report and our confidence that a bottom has been made has weakened.
I believe the primary reason continues to be the big swings in the Dow and crude oil. Monthly job losses are at a 26-year low and increasing every day. Talk of 10% plus unemployment is growing. The domestic auto industry is in a steep downtrend with no short-term solutions. The big issue continues to be how big of a hit does demand take?
My concern is growing that we could easily see a bearish supply/demand report as we move into February. I don’t like saying it, but the pressure we are seeing on corn and wheat could easily continue for most of the first quarter of 2009.
Suggestion: IF futures-to-arrive cash contracts have been made and anyone is still open the basis, look at locking up cash basis on a sell off in the futures market into the end of the month. If there is unpriced corn and wheat, I feel limited upside potential exists until we get some type of supply problem to develop. In the case of corn, it’s really difficult to see much upside potential until summer.
In regard to beans, the story really has not changed that much. Near-term the stocks are reasonably tight. This means beans have the best potential of a rally, in my opinion. The drawback for beans is, with high input costs and potentially tight cash flow [if bankers start to pull back], one has to anticipate significantly higher planted acres in 2009.
The conclusion is all producers really need to pay attention to selling 2009 beans above $8 cash as soon as possible and then only defend if we get a solid technical breakout due to weather problems.
Summary: I would not be surprised to see the volatile, choppy nature of the markets continue. This will be great for the short-term trader, but difficult for long-term traders.
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