Published on: 15:06PM Sep 11, 2008
Crude oil and the dollar index continue to put pressure on the big index funds to liquidate their once golden holding. The investment community is getting a strong dose of reality now about commodities and it’s not liking it. I would not be surprised if we see a lot of board of directors changing their attitude about investing in commodities for a while. As the money dries up, it’s going to take more and more bullish news to keep the market stable.
The Supply/Demand report out tomorrow is expected to show little to any drop in corn and bean yields, in fact I believe one must be prepared for an increase in numbers. The player who’s betting on reduced yields really has to wait now until the combines really start to run. If we don’t see any material loss from the frost later next week I believe it will be difficult for the bulls to hold ground. A final flush in the commodity sector could really be seen over the next 30 to 45 days.
This is exactly when end users or persons looking at long term reownership should be getting prepared to buy for a long term sit and hold position. The reality -- everybody is now getting bearish! So all feed buyers out there really need to start scale down buying December 09 corn below $5.70 and be essentially done by mid-October below $5.50 level.
As for beans, I believe we are approaching the last real chance for beans. If we don’t confirm yields below 40 bushel this fall, the beans are done. I want to suggest acres are going to explode domestically and internationally while demand is going to stagnate. This is a formula for long-term problems. I would strongly recommend all clients to be working hard on scale up selling November 09 beans starting at $12 plus.
Bottom line: I’m starting to be very concerned that while we will get confirmation of lower corn and bean yields it’s going to be difficult to get the magnitude of the rally that we want because of a stronger dollar, reduced levels of speculative fund money and finally a change in attitude toward ethanol government mandates. This suggests December 08 corn above $6.50, wheat above $10 and beans above $14 will now be extremely difficult to see in 2009.
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