Continued Long Liquidation!
Nov 22, 2010
The continued long liquidation due to lack luster exports and concern about the status of ethanol blender credits has continued to weight on the corn complex. The market started the week off on a negative tone and is expected to continue well into the First Notice Day. That’s the bad news; the good news is, since we are clearing the deck of a lot of weak longs, we are also allowing end users to get inventory bought at attractive values. This implies longs are moving into very strong hands. The March corn contract is trading right above a four-point uptrend support line. If this level is broken, it could move down to 50% of the total June to November rally which comes in around $4.84. This level of correction is not expected; but, if seen, we believe it would be an excellent buying opportunity for all feed buyers and anyone wanting to reown inventory.
We continue to expect supply will be reduced in the January reports. The current price decline will not excite producers to raise the necessary acres of corn and we really believe China will not reduce its demand of corn and soybean products that much in the first half of 2011. We still believe the odds are better than 60/40, the market will test and perhaps make new highs in 2011.
Bottom Line: This is not a time to panic and sell cash or futures. The only action we like now is rolling down long calls or making catch-up purchases.
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