Could the Corn Crop be Bigger than Suspected?

July 29, 2011 10:12 AM
 

This information is provided by Archer Financial Services, Inc. 800-933-3996.

 

The trading ranges in the three major agricultural commodities were not particularly different than they were last week.  The difference was that while the markets last week closed near the middle of their weekly range, this week’s closes were near the weekly lows. 
 
We started the week with crop concerns that were emphasized by a 4% decline in corn condition ratings and a 2% decline in the soybean condition ratings. 
 
Highs for the week were forged on Wednesday as the market digested lower yield estimates. 
 
Slow demand figures on Thursday and poor economic data on Friday lead to a late week sell off. 
 
A much discussed feature this week was the disappearance of the inverse in the September/ December corn spread for the first time since last August. The arguments for this ranged from poor demand for corn, to greater feed wheat substitution, to front running the fund roll activity that is expected to begin late next week. 
 
However, it may be as simple as the fact that perhaps there is more corn out there than what the market suspected; just as the USDA laid out in its June 30th Stocks Report. 
 
The market will start next week by reacting to any news from the circus in Washington DC.  However once that has been factored in, look for the next few weeks to be range bound as the market will adjust to various yield estimates culminating with the USDA Report on August 11th
 
The use of short options or nimble futures positions as the market works towards the edges of their tight trading ranges may be the best way to trade this market in the short term.  Any larger moves will have to wait until more is known about this size of this year’s crop. 

 

(click the charts below to enlarge)

 Market Movement Chart 7 29 11

 

Weekly Prices 7 29 11

 

COT 7 29 11

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