The bullish rally came to a screeching halt today. We saw weakness in many commodities—corn, beans, wheat, oil, gold, the Dow and a stronger U.S. dollar. When so many commodities act in unison like they did today, it does cause one to pause and ask if something is happening.
While all of Washington is focused on the health care bill debate, life does go on; other things are occurring that are really troubling the market. I find it interesting how little discussion was given to the Fed Chairman’s statement this week that interest rates would be allowed to stay low for a longer time period than normal after a recession due to the unusual weakness of our general economy. This plus the European mess with Greece and other countries continues to put uncertainty in the market as to what will happen to the Euro. In summary, it appears the domestic and global economies may not be falling into another recession, but the odds are equally high the level of economic recovery is will be slow. This essentially means that job creation will be slow, tax revenues will be low and the battle over spending will be even greater than ever. If massive spending programs are implemented by Congress with big tax hikes, it only burdens an economy that is struggling to stay afloat.
Implication: With limited growth in demand and the current high domestic and global stock numbers, traders see limited reason for a sharp price advance at this time for corn and beans. Bottom Line: To move higher we will need a serious spring planting delay.
Finally, I sense that many producers are holding back a lot of unpriced corn and beans that must be moved this spring before planting or until after the March supply and demand repot in hopes of a bullish revision in numbers. My caution is we are setting ourselves up for a bullish report and bearish reaction if we are not careful. If you need cash flow, I suggest selling inventory into the report rather than waiting until after the report.
I encourage everyone to get their market plan written down now for the 2010 and 2011 crops. Only by knowing where you want to get to, does one have any hope of accomplishing their objectives. If you are need help, call us at (800) 832-1488 [Rowland & Laura] or at (877) 898-4324 [Bob].
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