CoT & Price Action March 19 plus first price predictions

Published on: 13:33PM Mar 19, 2011

In fast moving situations, CoT reports are pitifully late. We just got the report for the week ending Tuesday, March 15. The CFTC 'oughta' require reporting daily with open interest, volume, and ownership posted at the end of the day. The stockmarket can do it, and they trade about ten times the transaction volume the futures markets trade. Oh -- I keep forgetting. We have to maintain extra advantages for the people who own the US exchanges, keep data secret so only they have the complete picture. Grrrr.

OK, so wheat saw commercials release some of their shorts, small specs/farmers increase their shorts and funds increase their longs. Price action this week was almost net zero against last week. At this point, my guess is we will see prices fiddle a bit, dropping back to maybe $7 basis May, then rally to maybe $7.90. All that could happen while everyone worries about Libya and Japan. Eventually, someone will start to think about actual crops, but for now the players only care about the exciting stuff of headlines.

In terms of price action, beans look to be done with the current move down. I expect the same sort of fiddling around ("consolidation" is the term some "experts" use -- it just means no one has a strong opinion for a while) then moving at least to 1425 basis May. I'll not be surprised to see 1450 or higher. Meanwhile, the commercial interests got less short, the small specs/farmers got more short and the funds got less long. I expect those numbers are not current, and that next week we will see funds a lot longer & commercials a lot shorter. Of course, I'm never wrong except when I'm awake or asleep.

Corn CoT scores look like beans and wheat.The price action for corn is the most bullish of the three May contracts. $8 corn basis could happen. 

I need to point out that the new crop prices are not old crop chart prices. If new corn looked like the May chart, I'd predict $9 corn before year's end & feel certain it would fill. Sadly for those who grow corn, that's not how things are.

In the new crop charts I see wheat rallying to just above $9 then (finally!) looking to see whether Russia and China produce any wheat. As part of a possible hedging strategy, when prices get up to $9, sell a few calls. My built in assumption is wheat growers can afford to sell part of their crop at $9 and make money. You will get a substantial premium for the $9 calls, making your effective price considerably higher. It is your money, since you plan to deliver against the contract. If prices go down, the calls will expire worthless, & you get to sell the wheat again, albeit at a lower price. If prices go up, (a) you have the rest of your crop; and, (b) $9.50, which is the $9 call plus my guesstimated premium of 50¢, is a decent profit on the portion against which you sold calls. 

New crop beans I'll not predict just yet, except to say "above $14". I think $15 beans are a real possibility, and if everything goes badly, maybe $16 or so.

New crop corn looks as bullish as old crop, but is starting from a much lower base. I estimate $7.60 basis December is a 'gimme.' $8.20 is a reasonable guess, along the lines of $15 beans. And, if things go badly, $9.25 or so might be reached.

Finally, if history repeats itself, the 'goes badly' numbers could be low, perhaps very low.