After being very active last week one would have thought the market would try to consolidate to build support for a bottom. Instead, the market has now moved sharply higher on Monday after a very open harvest weekend. Historically, one would have expected weakness today on harvest pressure but it was not to be. So goes the current price action, expect one thing and you get another. I have to say today’s rally was more about aggressive short covering and some end user buying hoping last week was the bottom.
Outside markets seem to be suggesting the panic low is currently in for the equities. I recently heard a good analogy about the economy—it had a heart attack, died but was shocked back to life. It is alive and stable now but we really don’t know the extent of the damage to the patient. This is what everybody is going to be breathlessly waiting to see, "how has domestic and foreign demand" been affected. We know there has been damage but to what extent. This uncertainty I believe has to keep the upside potential for all commodities in check.
The other variable that’s going to have a big impact on corn is the energy markets. OPEC is having a meeting later this week and talk would suggest that a drop of over 2 million barrels a day of production has to be seen to bring supply back in line with demand. Just like all producers they’ve gotten a little used to the good times, the issue is will they agree by all players to reduce production? Talk on the floor is crude will find good support between $65 and $70. I tend to
agree, the issue now is how fast of a bounce. I would not be surprised if we saw between $60 and $100 for some time now as domestic production starts to ramp up at a time when the economy will more than likely be producing subpar growth.
Bottom line: The market is due for a technical bounce but I don’t have any strong bias that we are really going a long way up. Instead I would tend to say a sideways trading band would be the more expected price pattern.
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