Published on: 11:51AM Jun 07, 2010
The corn and bean markets are reflecting good growing conditions and bearish outside markets. While beans did take out a few shorts yesterday, the bulls could not hold the ground gained and gave it all back today. It’s widely assumed that limited supplies of old-crop beans exist. The crushers want beans, but if they have to bid up too much, they will simply shut down due to poor profit margin and for planned yearly improvements.
Outside markets continue to be very negative, with the Dow close to 10,000, and the dollar was up. The jobs outlook today did show overall growth, but it was primarily in government workers, which is short-term. The private sector added a very anemic 41,000, which is hardly a sign of robust economic growth. While these numbers are concerning, the big uncertainty continues to be how deep the European debt crisis will get and its potential negative impact on China and India, which are major trading partners.
Overall, our concern continues to be that supply in regard to corn and beans could easily be average to above expectations, while bullish demand prospects fail to hit the market due to a deflating global economy. Overall, this forces carryover up at a time when producers have limited new crop inventory sold and rather large supplies of corn and wheat on hand.
Implication for market plan. I am bearish but finding it very difficult adding new cash or futures sales after such a negative last few days. The market is clearly oversold and should bounce. I suggest now would be a great time to put in a bearish put strategy which protects most of the downside risk but limits your cash flow exposure if we get any type of hot and dry July/August weather event.
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