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Commercials Swinging Beans?

Published on: 14:44PM May 03, 2010

Corn is still owned by both commercials and funds with the smaller speculators in the dangerous short position. I say “dangerous” not because short is inherently more dangerous than long, but because holding a position opposite to both big money groups means your timing has to be exactly on the mark, and because this is growing season, when bear markets seldom develop but bull markets often do. While corn had a good week over all, it was not a great week. I expect backing and filling until (and if) we get past $4 basis July.

 

Beans have had a shift in sentiment from “all the money is long” back towards a more normal commercials on one side and funds on the other. Again, the smaller specs are short. A drop to $9.70 basis July is likely, but a drop all the way to $9.41 is unlikely. Today’s drop looks bearish, but beans, like the stock market, can look terribly bearish based on today’s bar, but rally tomorrow or the next day just as if there were only two bushels of beans left in the whole world. It seems the commercials are swing trading short term moves, looking for about 50¢ going down but riding the long positions a bit longer. I’d guess the next up swing will ride to the 1060-1070 area, but first I’ll worry about getting on board when we have a turn (soon, I’d guess).

 Wheat has generated as much partisanship as politics does. Commercials remain mostly long with funds and specs mostly short. The closest nearby similarity for open interest was mid-2006 which set up a bull market for 2007. This degree of partisanship was in 2005 with wheat at $3. If you can figure out how to store your wheat at almost no cost and how to live for two years without selling your crop, you may well get $11 or $12 for it. Indeed, if you can do that, you might get very good prices for two years of crops. From here, it looks like $6 to $6.50 is all we will see this year.