Caution to 'Bottompickers'

December 3, 2008 06:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

Updated as of 7:00 a.m. CT

Caution... I've had a few more calls this week from people wondering if now was the time to start loading up on call options for corn and soybeans. My first reaction is, "I don't have a lot of confidence the market has posted a low" -- which generally shifts the focus of the conversation... to the economy, to demand, to 2009 acreage...

I laughed when I wrote the word "bottompickers" in my headline (it isn't an attractive sight)... but that's what we call people who are trying to time everything just perfectly, and often get burned. However, I applaud those of you looking for a marketing opportunity, and at some point, buying call options on 2008-crop sales will (hopefully) be a good strategy.

Once the economy gets straightened out and confidence rebuilds in America, we could launch into another bull market. My concern is while the U.S. economic mess could be straightened out by spring, global economic woes could linger longer, trimming demand for U.S. commodities. Time will tell; fortunately the 2008-crop marketing year doesn't end for another 9 months and the 2009-crop marketing year won't end for 21 months.

Keep your comments coming. Always good to have conversation with you and input on what you'd like to talk about. E-mail your comments/question to me by clicking here. Please include your location.


Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 2 to 3 cents lower. Futures were weaker overnight on light spillover from yesterday's near-session low close. Futures closed steady to marginally lower yesterday, seeing a choppy day of trade due to outside market influences. March corn futures posted a new contract low of $3.45 to maintain a negative technical outlook. Downtrending resistance drawn off November highs currently intersects around $3.50.

Soybeans: 7 to 10 cents lower. Futures closed lower overnight on light technical selling. Futures closed mixed yesterday after a choppy day of trade. For soybean futures to find sustained buyer interest, strong support must come from outside markets. While soybean traders have been closely watching the crude oil market, the dollar and the U.S. stock market will also remain key to near-term price direction.

Wheat: 2 to 6 cents lower. Futures were weaker overnight on spillover pressure. Futures slumped into the close to finish on or near session lows. Concerns over the competitiveness of U.S. wheat on the global market remain. The U.S. has struggled to attract consistent export business as world supplies are sufficient and there are plenty of foreign countries willing to undercut the U.S. on price.


Cash cattle expectations: $1 to $2 lower. Weakness in cattle futures has lowered cash expectations, with more bids reported in the Plains today. No active cash trade has been reported, as asking prices are around $90, which is steady with last week, and bids were around $87.

Futures call: Mixed. Futures are called mixed as traders evaluate positions and watch the stock market. Traders remain concerned about the economy and look for the stock market to continue trending lower and pressure cattle. February live cattle gapped slightly lower on the open, filled the gap, but closed just below opening levels and just above contract-low support of $83.80.

Cash hog expectations: Mostly steady. Packers are still working with profitable margins, which gives them incentive to fill slaughter runs and raise cash hog bids. But if margins tighten, packers will be quick to lower cash bids to keep their bottom lines from falling into the red.

Futures call: Mixed. Futures are called to open mixed following yesterday's losses amid short-covering. But yesterday's negative close opens the door to additional near-term downside risk. February hogs gapped lower to leave a 4-day island top on the daily chart. A drop below the Nov. 25 low of $63.75 would open the downside to the Nov. 20 low at $61.65 and possibly to the contract low at $60.50.


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