Published on: 16:37PM May 25, 2010
Commodities were weaker across the board today, as the dollar was up sharply, almost 88 points and the Dow was down over 200 points below the 9800 support level. It all goes back to growing concerns over the European debt situation that is not leveling out. Instead fears are growing that it could intensify and become even more deflationary on the world economy.
So the question being asked, is this a buying opportunity for commodities or it time to be careful? Our prospective here at UMS is we are focused heavily on being short now because of growing concern that demand is going to be flat to declining and supply is building which will grow stocks for corn, beans and wheat.
As a seller we also know based upon seasonal patterns, clear risk exists over the next three to four weeks. I saw one study suggesting the odds are greater than 80% that July beans would rally from Memorial Day weekend into mid- to late-June. I essentially do not want to argue with this seasonal bias.
I however have limited interest in trying to speculatively buy the market for this potential bounce. Instead, I would focus on making sure all short positions are prepared for a bounce and be lining up financing to ensure all positions can be held and actually increased if we are able to get a solid price bounce over the next 45 days.
The overhead resistance for December corn right now is $3.90 to $3.96, for November beans $9.45 and $5.55 for December wheat. My suggestion is you need to sell very aggressively around these levels and then prepared to defend if you get much more than a 5% price event move.
In summary: Since the outside markets are getting increasingly volatile more than ever we need to focus on profit. We remain committed to selling the summer rally and then preparing this fall to buy commodities for the feed buying and reownership commitments.
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