Bounce in Corn was More About Taking Profits!
Feb 01, 2010
Today is the first day of February and the bulls are hoping that the worst is behind them. The problem is plenty of grain is available to the market, the outside markets are sputtering and limited new bullish fundamentals are developing for the grain and oilseeds. Today’s bounce was more about easing an oversold condition than a new buying spree. I would suggest its simply a case of the shorts taking some profits before next week’s USDA Supply and Demand report. In fact with all the open interest still remaining in the March corn and beans, we have plenty of downside risk still left for the end of February.
Looking forward I have to suggest several things have to happen to allow prices to move up to the level seen less than 13 days ago.
- The March USDA Supply and Demand report has to show a modest reduction of the corn and bean crop due to harvest problems.
- The global economy has to start showing solid job growth.
- We need to see modest delay’s in spring planting of Midwest corn.
If all of these conditions are seen over the next 45 days, we will see a strong rebound in corn. So for now I have to say we are nearing a time period of weakness. One should be adjusting positions and preparing for some type of seasonal bounce. How much of a retracement of the last 13 days is dependent upon variables that we simply can’t predict at this time. So all we can do is prepare ourselves to sell based upon time and hope we get the best potential recovery possible.
Special alert: From time to time we will be talking about locking up input costs for our clients for the 2011 and beyond time period. We are of the opinion that we are quickly ending a period of low interest rates and preparing for a long-term uptrend. We would suggest the need to start looking at selling the 10-year T-Notes to help offset upside risk exposure in interest rates. Our target price levels are 118 to 119 basis the March. If you are interested in long term interest rate protection strategy, give us a call at (800) 832-1488.
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
February 2010: Louisville, KY … Anaheim, CA.
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