Grains bounce on global weather concerns

Published on: 15:56PM Feb 05, 2009
Markets bounced on continued concern regarding Argentina’s weather and positive exports. Soybeans moved up as much as 30 cents today and corn was close to 10 cents higher on lingering concerns about how much the crop will be reduced in Argentina due to dry weather. China is also getting attention as its drought extends in primary wheat production areas. It should however be noted much of this region is irrigated but still yield reduction is expected. At the same time, corn exports bounce back nicely today giving hope that while we are still well below the historical pace we will still meet USDA expectations.

Next week’s USDA Supply and Demand report is shaping up to be very interesting and potentially very volatile for all ag markets. Our expectation going in is corn carryover will be increased while global supplies of beans and wheat could contract a little. I would not be surprised to see a bearish report in corn. The issue is how negative can we take it down. I’ve been talking a lot about getting in position for a seasonal rally in corn on my internet daily comments.  I’m still of the opinion that we are nearing a time period to buy. The issue is at what price will it be safe.

The big positive is lack of farmer selling due to low price and delayed spring plantings due to cold and wet conditions. The bad news is we have plenty of grain in the bins and world demand is continuing to contract. End result: For prices to move as high as producers want to cover this year’s higher costs, a significant weather event must be confirmed.

Looking down the road to summer/fall time period, I see a lot of red flags developing. The biggest one will be lack luster consumer demand will send end users into a hand to mouth buying strategy. At the same time, a lot of old inventory will still be around and be forced to move into the marketing channels before new crop comes on board. Without some significant weather pressure, both beans and corn will have the potential for significant downside risk from mid-June to Sept. 

So for now we want to look at some strong speculative buying strategies in February but by early June we want to be aggressively short into the fall time period for corn, beans, and wheat. For details on our specific prices and strategies see our web site at www.utterbackmarketing.com.

Final comment: We are now in the crop insurance season. We realize it’s a big financial expense but taking out an 80% CRC crop insurance program on beans could really give you a solid financial reward.  By having the insurance in place and then selling the cash the potential for returns will be huge. If you have any questions about crop insurance give Rowland a call here at UMS at 1-800-832-1488.

If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at [email protected] or [email protected].

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