Published on: 16:25PM Jul 26, 2010
I spoke at Purdue’s Top Producer workshop and Farm Journal’s Corn College last week. Producers were neither bullish or bearish about the market. Overall, I would have to suggest the attitude seems to be very subdued. This behavior is not really a surprise in light of the significant price movement we have seen before and after the USDA acreage report. Right now, I would suggest we have a very good crop coming on board overall, with a lot of holes due to the June rain. The test weights will be good as contrast to last year. My bias continues to be that we will be surprised as to how good the crop will be once the final numbers come in but the Chinese buying pattern will keep lows tempered.
Long term, the real concern will be how much weakness will the domestic and international economy experience over the next year. Bottomline: December 2010 corn will have difficulty staying below $3.40 for any length of time but equally it will have difficulty spending much time above $4.25. This range-bound type market will be difficult for trend followers since no trend exists. It will also be difficult for clients who are long out-of-the-money calls or puts since the risk volatility will tend to drop as we move into fall and time value will occur. Subsequently the cost of the premium will be greater than the flat up or down side potential of the market.
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