Strong Long-Term Outlook for Prices

October 26, 2012 10:57 AM

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

The grain markets continued their quiet sideways trade that began at the start of the month.

The corn market made its high for the week on Monday and spent the rest of the week drifting lower in a $.30 range. The soybean market, conversely, made its low for the week on Monday and crept higher into midweek on solid demand and mild concerns of dryness in Northern Brazil.

November soybeans closed back above its 100-day moving average for the first time in two weeks, but was unable to find follow through into the week’s end. November soybeans were drawn to the $15.60 strike price for Friday’s option expiration. I look for a minor uptrend to continue early next week, with a close above $15.74 setting up a move to the $16.00-$16.30 area basis November futures.

December corn continues to work sideways, spending most of its time trading either side of $7.50. Last year the corn market began a mid-November slide that saw values drop nearly 15% as the funds reduced their long position by 70%, selling over 100,000 contracts.

The demand for US corn is tepid at best and the market struggles to find fresh market information to justify higher prices at this time of the year. With the funds still holding over 200,000 contracts of long corn positions, producers should be looking to protect against a sharp downward correction to prices, similar to last year.

Although, the longer term outlook for prices remains on solid ground due to low supplies and an expected strong cash market through the winter, the more immediate concern is a breakout to the downside that may begin based on outside influences, but continued by year end fund liquidation. We have established short term option strategies that will protect producers if this scenario develops.


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