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The USDA October surprise in the corn market most certainly caught speculative funds leaning the wrong way and obviously, they spent the final few days of last week trying to rebalance that position. It is difficult to say if all of them hightailed it for the safety of their caves to hibernate for the winter, but considering they purchased over 31,000 contracts on Thursday and Friday out of a short position of around 34,000, it would appear it was the lion’s share of them. As we know, the end result provided December corn with the highest weekly close since early August, but now what?
While I do believe the action in corn last week did confirm that we have already established the seasonal/cycle low, but we still have a few things to contend with, the largest of which is the harvest. Granted, limited progress will have been made for much of last week, but combines were rolling into the weekend, and the extended forecasts are calling for a dryer second half of the month for the majority of the corn/bean belt. Seeing prices drift back lower into November would not only seem reasonable, but I also suspect it would provide a nice opportunity for end-users.
Largely overlooked with the excitement of the USDA numbers, Strategie Grain boosted the estimate for the EU corn crop last week. While all the focus has been on the drought in France and Germany this past summer, it turns out the weather was quite good in much of eastern and southern Europe, and according to their estimates, the corn crops in Hungary and Italy should pretty well offset the losses elsewhere in Europe.
Of course, how could we finish this morning’s comments without a word on the markets that created many and ulcer last week; equities. Prices are slightly softer as I write this morning but after the Friday rebound, that is expected. The biggest question on many minds is if that flush signaled the end of the this nearly decade-long bull market or not. As I commented in the weekly newsletter, while the beak thus far is certainly not extraordinary, there are more than a few signs that the pendulum is ready to begin swinging the other direction. This does not suggest that we have a panic ready to ensue, but for now, the era of rising equities may have drawn to a conclusion, which for us in the commodity sector, could very well be good news.
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