Advisers: Sell 2009 Corn and Beans; Wait on 2010

May 20, 2010 06:00 AM

Many of the marketing advisers tracked by Top Producer moved to 100% sold on 2009 corn and soybeans in the past month. They say they see little prospect at this point for much better prices or basis.

At the same time, the hedge fund class is reported to have an increasingly short position. Index funds continue to build a long position, partly because that's what they do (they are buy only), and partly because they are in for the long term, so buying in a stable or weak price time is an example of "buy low, sell high". See chart.

Technical indicators may be behind some of the sales, and new-crop soybeans look negative as well: "Tuesday's soybean high at 949 1/2 was right against the May 7 low…old support is becoming new resistance," points out Bill Biedermann of Allendale. "Selling rallies against this level now seems appropriate. Without any short term bullish news, it will be difficult to change direction in beans if the dollar remains firm. 

"Technically, a rally above 950 would be needed to justify a move to 966. As long as the direction is down, 925 and 914 are short-term objectives," he says. "Longer term (by fall) we expect the 800 area will be tested with good weather.  Producers should be 100% sold on old crop and 75-100% sold on new crop."
Biedermann recommends buying puts and selling a call. Selling an out of the money put would further reduce cost (contact Biedermann at 800-262-7538).

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