Published on: 14:42PM May 12, 2010
The neutral to bearish USDA Supply and Demand report is now behind us. While some corn needs to be planted, overall the crop is off to a great start. The market continues to work higher, why? Chinese purchases of corn have exceeded expectation. They bought again last night and no one really knows how much more they are going to take. This uneasiness is keeping the bulls in charge of the market right now. We are also testing some critical overhead resistance levels. If the market breaks December corn above $3.96 we would assume some sell stops would be hit. The next big levels are $4.05 and the final level would be $4.12. While some speculative buying is coming in I believe the real reason for the rally is simply short covering. Once its over, the bulls are going to have to have solid proof of continued strong Chinese buying or some major weather scare or we are going to trap the bulls right at the high.
Special note for those not watching the markets: If you can keep your cost around the $3.50 level and production around 187 bu. per acre, the July 2012 corn is posting around a $150 return above all cost now that it’s moved to $4.40. Even with all the talk about inflation one has to think this is a solid price level to start looking at selling. We will be looking hard at selling this and higher level in our electronic copy.
In regards to beans it has seen a lot of volatility today. It was higher on the open in unison with the corn and then started to break. It looks like a classic bear trap, stops get hit every one gets excited, the market gets higher and then drops. Remember, the supply/demand report suggests domestic and global stocks are going to increase in 2010. Granted there may be some difficulty being short in August if we have a dry weather event but overall if the acres get planted we believe the trend will long term be lower.
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