"What's Important Now!"
Jul 01, 2011
WIN! During my football days it hung in the locker room and stood for "What's Important Now!" I can hear the coaches yelling as if it were yesterday. Essential it was used to let us know that no matter what we had thought to be right, or what we had seen in the past, anything was possible, it was all about "What's Important Now!" Nothing could be more clear than this in today's Grain markets. We could certainly sit and debate the USDA numbers, and try to figure out how the boys at the NASS, in just 15 trading days have been able to find 1.6 million more acres of corn than the boys over at WASDE, but the bottom line is the "Running Of The Bulls" in corn has ended, at least for as far as the eye can see. As you have well noticed, I had reduced my "bullish" sentiment rating down to a "2" several weeks ago, then reduced it again to it's lowest level "1" a few days back. I am now going to "neutral" for the first time since the Spring of 2010. The only reason I am not moving to "bearish" is because of the longer-term play that we still have to actually produce the crop still remains. Not to mention the fact that old crop supplies could come up extremely short closer to harvest. The problem I see is that with improved weather conditions being forecasted in the weeks ahead, the market will continue to focus on more "bearish" news. If you want to make the "WIN" acronym even more fitting for our current grain markets try using "WEATHER's Important Now!". Even though there may be some validity to the fact that the USDA didn't account for all of the acres moved in to "preventive plant", no one is going to know until September or August (now that they are going to re-survey). Between now and then it's all about the "weather", with that being anyones guess, it honestly wouldn't surprise me one bit to see Dec corn pull all the way back to $5.50, or maybe even lower. In fact, it wouldn't surprise me to see Dec corn trade in a range somewhere between $5.00 and $6.00 until we get further down the road and see some different data. Unfortunately I am afraid this is going to leave us in a precarious situation. Not only will we have much cheaper corn, but I am afraid in the end we might just end up with NO corn. You have to believe with old crop supplies getting much cheaper domestic and global end-users might just run supplies dry. Bottom-line, if we don't grow a crop, we will be back off to the races, and explosive prices will be in order. If the crop comes in as big as anticipated, we will continue to drift lower, at least until the next major production type obstacle is thrown in our path. Looking forward into our proverbial "crystal ball," I have to believe wheat quickly gains on corn. You also have to believe wheat will then no longer be considered a viable alternative to corn. I also have to believe with fewer bean acres being thrown in the equation, soybeans will now start to aggressively gain on corn. This pattern could eventually turn back around if corn production starts to be questioned, or Chinese soybean demand pulls back. For now though you have to believe there is no alternative but for soybeans to start gaining on corn. I also have to believe we will soon see the Dec corn trading at a carry to the Sept contracts. For those of you who followed our advise and didn't roll "ALL" of your sales forward to the Dec contract, I think you are going to be pleased with the results here in a couple of weeks, or should I say once Dec starts trading at a carry to Sept. Looking back now, I wish we would have never rolled any into Dec, but we simply couldn't take that risk at the time considering the market sentiment. The way I see it, the "Bull's" are going to need some time to heal after this one! I was extremely excited and pleased with our cash positions and hedges heading into this report. We have some fantastic cash sales on the books, and some terrific hedges in place! I hope we have been able to give you some good insight and help with your marketing in these volatile waters.
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