Rain makes grain!

Published on: 09:07AM Jul 08, 2008
The bulls went long into the holiday weekend expecting hot and dry and then the rains came into the Midwest reducing a lot of the heat. Guess what, the crops are starting to look better. Our expectation is the weekly crop ratings will be improved for corn and beans.
All of this plus continued concern that something could happen by the government players to reduce the attractiveness of the ETF’s investment money in commodities was simply too much for the bulls today. As I suggested last week on Ag Day, this market is going to continue to be very violent which leaves producers in a difficult decision making process of how much risk to take on a day-to-day basis.
The corn and bean charts have now developed a very dangerous double top. This is going to give the bears some confidence in July as the crop improves. If you’re a long-term bull waiting for a demand rationing event in the November-to-March time period as I am, the current correction is desperately wanted.  I’ve been on record for some time now looking for a cooling off in July. I’m not going to tell you I saw limit down moves in corn, beans and wheat as we are seeing today but frankly I’m not that surprised.
How far can we go down?  I continue to believe wheat will be the weakest of the commodities because of building world production capacity. Remember wheat can be produced in several parts of the world which allows a crop to be coming into the world system much more frequently than corn and beans.  I would suggest producers really need to take advantage of any solid fall rally in corn and beans to get a base under their 2009 production.
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