Big Price Swings in the Grains
Nov 03, 2009
Rather big price swings for this time of year are starting to wear on everybody. While the supply fundamentals of corn and beans are important, we are now becoming quite aware that the influence of the outside trading funds is dominating the market.
The fear that last Thursday and Friday’s up and down price action is going to become the norm for the market, is driving many producers to throw up their hands and say "Forget the market. It’s too unpredictable!" I can’t say I don’t agree with this prospective, but I’ve also learned over the years when the market is frustrating, it’s normally the time to give it some strong consideration. Bottom line: When it’s easy to be a seller, I get scared but when it’s hard to be a seller it gets my attention to ask, "What am I missing?"
In last week’s special release regarding the March 1975 corn contract (the last year of a freeze and extremely poor harvest conditions) I came away with three conclusions. Once the crop gets in the bin, the bull is in trouble, I would suggest once harvest goes above 60% one should become aggressive about selling. Second, as long as the current trading prices are above the 21-day and 50-day moving averages, one should be in a limited short futures exposure such as a long put or a vertical put. If and when the market closes below the 21-day and 50-day moving averages one needs to be net short the market. Third, the high moisture levels of the harvesting corn plus disease is going to make it difficult storing the crop long term. This leads me to the conclusion that forced cash sales will have to come back into the market in January to February. This will lead to a wider than normal basis and the spreads should increase as the nearby falls to the deferred.
Special note: I’m will be on the road this week traveling down to Sarasota to set up my winter office. I will try reflecting on what I’m seeing in my Wednesday copy. If you have any questions that you would like address just give us a call at (800) 832-1488.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.