Published on: 13:46PM Jul 25, 2008
It’s Friday and everyone is ready to get out of Chicago. I suspect after the rough and tumble last 18 days the bears have decided to take some of their money and run. As for buying interest, I have to suggest it’s modest at best. Everybody wants to wait to see if we cruise down again to the old lows after the August reports.
As I suggested yesterday, the tone is producers want to buy beans more than corn right now. The reason being tight stocks exist in beans and second the beans are late. The cash market is starting to support the bias of higher values in that basis has gone premium now. Some are saying basis could actually go a lot higher. I would suggest one has to be careful in getting to bullish the basis. If you have hedge to arrive contracts on the books I would really look aggressively at locking up the basis.
Outside markets were rather quiet today. The dow bounce back a little after yesterday’s losses. My bias is the trend is down because earnings are going to continue to be weak as the effect of $4 GAS works its way through the economy. The dollar continued its slide but nothing acute. Crude oil gave ground but fought the break all day long. Many believe crude will halt at 120 while others say it will go back to 100. I’m more of the $100 camp unless we get some type of weather in the gulf this fall.
In summary: Increasing outside market speculative excitement of inflation risk is slowing down. If grains are going to bounce back quickly, it will have to be due to weather. Right now the greatest risk is simply the crop is late and the sensitivity it will have to frost scares in September.
What should the focus be right now? I have to suggest end users such as livestock producers, commercial buyers of product such as ethanol plants, or big end users should be using this big price sell off to start moving into a 100% hedged position of next year’s corn needs by no later than late August. In regards to soybean meal I would get at least three months protection. The problem for beans is acres are going to increase in 2009 which is bearish but near-term the crop is late and any fall problems will send the market to new highs. I would not suggest it would be out of line for all end users to have 4 to 6 months of soybean usage protected during this very uncertain time period for beans.
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