When To Sell Your Corn, Beans and Wheat
Oct 08, 2010
I hope those of you who have religiously followed my post have been acting on our information and now have a great position in the grain markets.
I took a lot of heat from some of the other advisory services when I was preaching "Do Not Get Over-Sold" back when corn had fallen below $4.00.
I held my ground and now have our clients in fantastic positions, with no more than 60% cash corn and beans sold in 2010, and still ZERO% sold for 2011.
I have some specific cash sale recommendations coming out next week for 2011 that you won't want to miss. Be sure you sign up for my FREE Daily grain marketing report to get all of the inside scoop.
Our research team has been predicting this type of explosive action for weeks now. The numbers simply did not pencil. Finally the USDA, and now the market is responding.
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What Happens From Here...When Do I Sell?
We are now looking at the tightest stocks to use ratio in corn since 1996. We went from them predicting the largest bumper crop on record, to one of the worst in the past fifteen years. The decline in corn yields today have to be the largest cuts I have ever seen at this point in the game. The kicker is I am not even certain we have seen seen the end of the cuts. In years that production estimates were cut in both Sept and Oct, we generally see more cuts and further declines from October forward. I personally wouldn't be surprised to see yields fall below 150 before all he smoke clears and dust settles. Everyone laughed at me eight weeks ago when I was talking about a 155 yield, now here we are.
You need to really focus on the long term affects of today's report, and assume rationing of corn is going to be inevitable. For that to happen we have to assume global grain prices will rise significantly to curtail demand. How high prices will need to go to slow demand will be the big question. After todays report you have to acknowledge the fact that the US and global corn stocks-to-use ratio has fallen to almost 15%, and is now at the 2nd lowest levels since the mid 70’s. With continued global growth in corn ethanol demand, and expanding feed use to meet the growing demand of global meat consumption I am just not sure where the cuts are going to come from. I can not envision the price price level in which demand will actually start to slow down...I am hearing now the magic number in corn will be closer to $6.50-$7.00 rather than $5.50 we had been thinking in the past.
I am going to be a little more apprehensive with soybeans, and urge you to do the same. Be cautious and don't get blindly bullish. Make smart sales as the market provides opportunity. Remember the USDA has a tendency to make the soybean crop a little large as we move from October forward, just the opposite of corn. We may get some additional help though before year end if the USDA realizes soybean acres lost may have actually been grater than the 0.7 million acres they are predicting. If you figure corn and wheat are going to gain a total 8.8 mil acres, I just think we may ultimately hear that beans have lost well over 1 million acres. If thats the case, even if yields improve slightly another big reduction in total acres planted will take us even lower. I still don't have a great handle on the total acres planted number just yet, but have a hunch beans may have lost more than they are estimating.
A for wheat I still believe the hard wheat will continue to gain on the soft wheat. I have been think that our wheat exports would lag expectations, but now I am starting to sing a different tune as the US Dollar continues to weaken, and all of my contacts in Europe are almost certain they will be running out of exportable wheat in the next couple of months, leaving all eyes looking at the US for their wheat imports. Our wheat carryover number has also shrank and is looking more manageable. Wheat exports could be significant after the first of the year, and could ultimately cause the markets to push even higher. Until then I still believe Corn will lead the way.
If you are still not long or continue to be over-bought, you need to be looking for buying opportunities as the funds will ultimately need to exit a large portion of their longs to book profits prior to year-end. If South American weather starts to improve we may see large profit taking in soybeans and another buying opportunity as we break. Wheat could fall back as well on lack of large exports during the next few weeks, If this happens I would look to get long the KC Hard Red Winter contract over the Chicago.
From everyone I have spoke with on the floor, there are still over 165k contracts in corn not filled. I am told a few large players may have been caught significantly short, and had stops at the monthly highs which prevented them from being able to exit their trades today. I am also hearing that many traders are expecting thousands of more orders to flood the markets Sunday night. Right now the synthetics have us trading at least 38 cents higher than our limit up finish in corn. Don't forget the corn limits expand to 45 cents on Monday. I am fairly certain you will see them trade limit-up. Beans are trading just 11-12 higher in the synthetics after finishing up 70 cents in today's action. Wheat is just a few cents higher. It wouldn't surprise me to ultimately see wheat trade lower Sunday night or sometime on Monday.
Hope this helps bring you up to speed. Make sure you give me a call if you want our help with your cash marketing next year. In the mean time be sure and get signed up for my Free Daily Report.
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