Well the one fundamental that I’ve been most worried about in regards to corn has finally happened, Chinese buying. They waited until after the market technically broke on Monday to make the announcement of the purchase. The weekly exports are clearly above expectations which helped to push the market back over the last two days.
The question now becomes is this a case of sell the fact or is it the start of a new bull trend? The market has moved back now up to a level where one would expect the market to stall out. To move higher now will take continued strong buying by all exporters. The talk already is some exporters are going to cancels some deals due to the recent rally.
Technically, a close in December corn above the $3.90 is a warning sign. A close above $3.98 in December would suggest all short positions should become defensive by rolling futures into puts or consider adjusting size exposure. A close above $4.05 is the last real warning sign for all corn sellers. Finally, a close above $4.13 would be the last signal for all end users to have all feed needs bought and I expect all speculators would be aggressively getting in position.
So the decision right now that one has to make is how do you want to manage the risk of your short position if the demand push can merge with a weather scare. I still believe the odds are less than 30% but they do exist. You need to be making up your mind right now how do you defend very profitable hedges against the seasonal upside tendency of the market even though we are going to have a record corn planting.
In summary: I still believe December corn has a 70% chance of moving below $3.20 this fall so I’m wanting to be a strong seller on rallies. The key right now is to remain committed but have a plan on how you are going to handle upside price advances “IF” they occur.
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