A Broken Record in the Grains

Published on: 11:02AM Jun 09, 2009
I know it sounds like a broken record, but the outside markets continue to dominate the trend of the underlying commodities. Today the dollar opened higher and the oil market was lower. This set the stage for weakness in the grain complex.

Please note we will have a USDA Supply and Demand report out on Wednesday. The bias going in is old crop beans carryover will be reduced below 110 million bushels. Traders are looking to continue to position themselves in the old crop/new crop spreads. Historical analysis suggests this could continue well into July and even early August. As for the old crop beans, we believe there is a bull’s-eye painted on it and it’s only a matter of time before bigger acres and weaker demand bring prices down. We strongly suggest all clients have an extremely large percentage of their 2009 inventory protected in the form of long puts.

As for corn, the market was down a little harder than I would have thought possible until we heard that China is going to export some corn. This could keep pressure on the market short-term. However, we believe that the odds are better than 50/50 we will see one more strong price surge into the end of the month on expectations of lower corn acres in the end-of-month acreage report.

Summary: If the dollar has made a near-term bottom and the energy markets have made a near-term top, the bullish influence on commodities could be cresting for now. This implies the market will return to its focus on the specific fundamentals of each commodity. It is my judgment that a mid-July to September selloff in both new crop corn and beans should be anticipated. We will be looking to aggressively sell a strong price bounce into the end of the month in the form of long puts in corn but strong cash sales in beans. If you are interested in more details, give us a call at 1-800-832-1488 for more electronic subscriptions or brokerage services.

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at [email protected] or [email protected]. Tomorrow we will talk a little about the bonds, gold and crude oil.
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