Published on: 17:49PM Sep 18, 2009
I was off by about four days in calling the weather scare week. I thought it should have been last week when the 10- to 15-day models showed frost but it was this week. The models showed the potential for a frost scare in the northern Corn Belt earlier this week but then effectively took the threat of a major freeze out on Thursday. We are ending the week close to where it started but the $3.02 level for December corn seems to be a level that prices don’t want to go below.
So what’s ahead? Supply bears are getting very comfortable with their positions and are willing to sit back and simply wait for the inventory to flow at harvest. I’m not saying we can’t have one or more weather scare bounce the last week of September, but at this time the bull quickly is becoming all bark and no bite. Any minor rally now of 10 cents or more in corn and 50 cents in beans is a selling opportunity.
So the question then turns to how low will we go? I don’t like to get into the situation of predicting an exact price because this is what sticks in producers mind and they can’t adjust if things change. I have to say the price pattern is now set up for a major low some time between mid-October and pre-Thanksgiving time frame. I want to see how December corn trades when it tests the $3.02 level the next time. My fear is we could see a quick failure in prices if the level is breached and longs start to liquidate. I think producers are gearing up to store a large percent of their unpriced grain. This implies the fall lows may not be as bad as some of the numbers you are hearing but equally the level of the price recovery could be well below your expectations. Yes, I do believe the market will bounce from Thanksgiving to late December, but from what level? I feel very comfortable is saying lead month corn is not going to trade above $3.50 corn for 2010 unless a significant supply or demand event occurs that we don’t know about today!
As a side note: In working with many producers, I’ve been trying to help protect the profit margin. Two areas of risk that exist on the cost side that you need to be thinking about long-term is protecting against long-term interest rate growth and fertilizer values. Currently, I’m starting a scale-down buying campaign for natural gas but would be waiting to the first of next year before I start selling bonds.
If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at email@example.com
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