Published on: 15:54PM Sep 22, 2008
The outside markets were quite strong today. Crude oil is now back above $108, the dollar down over 94 points and gold up $39. This bullish tone helped to encourage the corn, wheat, and bean market as well. Nearby corn moved up to $5.63, up almost 25 cents at one time, new crop December 2009 corn came within a ½ cent of getting back to $6 and July 2009 wheat was to $7.97. The bean complex was strong as well with November 2008 beans up to $12.03 at one time and next crop November 2009 beans back to $11.94. In summary, today was a very pleasant change from last week’s doom and gloom price action. The concern will be does this rally have legs to remain standing all week?
While there is a federal bail out coming, there are ALREADY are some difference between Congress and the White House in how it will be conducted. Concern is still very high that there are other problems to occur with the stock market. Perhaps one of the biggest concerns is: how involved will the government get in the stock market? With the regulation of the short selling programs, many insiders are getting worried that the U.S will move against speculative investment money in the market. If we take the speculator out of the market we also take the liquidity out of the market. The net result is we could actually make the market more unstable and my bias is the lows would be worse while the highs would not be as high if the hedge funds are restricted in their level of involvement in the market.
As you know I’ve been wanting to buy December 2009 corn. With the rebound from the $5.58 to the current $6 level I’m neutral now to the market. My focus would now be moving over to November 2009. When you can start making $11 plus for off the combine cash sales, I have to suggest you get a floor in place and then spend 60 to 80 cents to participate in upside price potential if a supply reduction event occurs between now and next year. Bottom line: I’m a supply bear and demand neutral to beans next year. To get prices back to the $13 to $16 level we are going to have to a major weather reduction or a significant change in tone of the demand market.
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