With the USDA coming out and announcing one of their largest corn sales ever, we sell off??? Just as I had told you in Friday mornings report before the open, the big boys were playing the rumors and bailing out and taking profits home when the news was announced. With so many longs looking to sell and take profits the market was simply overwhelmed and pressured lower.
The announcement of 1 million metric tons of "old crop" and 250 million "new crop" is supposedly one of the top ten sales announcements ever. Most in the trade believe in all likelihood it was China. Some however, think it may actually be Japan.
The hand on the sale was tipped Thursday when commercials started bidding up the barge rates and the basis really started to move. Certainly if it is China you have to feel the news is supportive longer-term, but if that is all they bought, some will view it as bearish, with most in the trade looking for a bigger number.
Regardless, I am telling you now if it is China longer-term this is bullish the market. This means China is in the corn importing game, and from what I can gather will be in the game for as far as I can see. This may be the beginning of China becoming a large global corn buyer and these markets forever changing.
As I have stated, no one is for sure if China is the buyer. Some insiders believe even if it is China, they may just be taking out insurance policies against fear of volatile weather or problems that may arise with their own crop. In any event, I believe this means their supplies are getting tighter and tighter. Sure it may not happen this year, but eventually China will face an extreme weather crisis and corn will be like gold.
Traders understand this fear and will be buying the breaks accordingly. You have to believe once sales to China are actually confirmed, a hypothetical floor will placed beneath the market giving support and strength to this bull-move.
Volatility could be extreme in the coming weeks however as traders play the upcoming USDA acreage estimates and US weather concerns. Use the hype and the rallies to get yourself in a comfortable cash position. In other words, don't hold out and make zero cash sales in your new crop, only to get cash strapped later on and forced to make a sale when the market is setting back.
I would like to see you get to about 20% sold in the new crop at $6.00 or better, even though I am long-term bullish. these markets are simply too volatile. Money-flow by the funds is king, at any time a "black swan" type event could arise and drastically change the dynamics. Be smart and take advantage of the higher prices. As I mentioned at my marketing rally in Kansas City last week, every looser in Vegas thinks he could have done better...winners walk away when they are on top.