Published on: 14:04PM Jun 18, 2008
The rains have come and now come the weeds. Producers are running hard to get all of the spraying and side-dressing done before the corn is laid over. It will not be long before the corn is too high to see the wet spots and the unevenness. Essentially, it will look great from the road.
This situation, along with much of the bullish anticipation of the acreage report, is already in the market and everyone is scared to be a buyer right now, which should contribute to a significant high just prior to, or right before, the 4th of July.
Look to see very choppy price action in the corn market where all end users and speculators would like to buy December corn back around the $7 level but the trade is scared of potential ending stocks getting too tight and wants to keep prices high to ration usage. Essentially, don’t look to Washington to put any clarity into the market. They are going to try to avoid doing anything major now until the grain is in the bin and a new administration has to handle the situation.
Essentially, my suggestion is if you have big profits in long futures or calls you really need to be looking at taking profits and being neutral going into the end of the month. The only thing I like doing right now is selling deep out of money puts with a delta less than 25%. It gains you money if the market moves sideways to lower. If assigned I will be at a price I can accept going into the fall.
As for the bean market we are in full retreat today. The correction is not surprising but a little troubling in light of the continued problems we are hearing about soybean production. I would suggest the current correction is more about profit taking than a new bear trend. Overall, I really like the current price of beans. As a producer I see nothing wrong in selling the inventory and then defend with a known risk vertical call spread.
Special note: All producers who have made hedge-to-arrive cash sales and must sell between harvest and March must be looking into the risk they have with the basis. If this market does move up and experience a blow off top, the basis could really widen significantly. This will lower your net selling price. I would encourage you to consider locking up all basis now for corn and beans. I know it’s wide but it could get a lot worse. Just ask the wheat producers. Basis has almost doubled in many areas.
If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies, email me at [email protected] or [email protected].
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.
UPDATED - Sources: Bush Admin. Has Authority to Cut Ethanol Import Tariff Temporarily
Under water in Iowa