Published on: 15:38PM Jul 28, 2008
The end of month bounce is now under way. The bears are taking some profits and few bottom pickers are trying to buy. The problem is we see limited upside potential right now. It is my opinion the market is going to have to wait until after the August Supply/Demand report. It should show some reduction in usage and we believe a disappointment in reduced harvested acres setting the stage for a bearish report and a bullish reaction.
The real potential on the supply side of the equation right now is how late the crop is. Granted it’s improved a lot but we are still seeing a large portion of the crop pollinating this week. This puts a lot of pressure on the market during September “NOT” to have any type of cold weather event. Since the full moon is around the middle of the month, everyone will start looking to the weather maps (I believe around the third week of August).
This would all suggest that shortly after the August report, if we are not able to test and make new lows, the fall lows are more than likely in. We want to argue for a chart pattern much like the 1993 pattern where the damage of the early rains was not known until we got into the fields. I continue to believe the best chance of strength will start to develop in October and prices will move higher into Jan to March time period to buy acres back due to high input cost.
Summary: I would suggest the odds for a retest of the low are better than 50/50. If the market doesn’t make new lows by mid-August, the odds are better than 80/20 we will firm into September. If no weather event occurs a retest and perhaps a new low will be made in late September. As we move into October, the trend should turn sideways to firm.
Strategy: IF you must sell off the combine I would focus on selling in the first two weeks of September. If you can, storage is still recommended for remaining unpriced inventory and holding into the Feb to April time period to price.
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