Modest Correction to Start Off November in Grains
Nov 01, 2010
The corn, bean and wheat market started November off with a modest correction. The corn market opened higher but could not hold and then sold off for most of the day. Beans were exceptionally quiet in light of the last few weeks constant climb up. The wheat market was the hardest hit today reflecting some concerns that the weather bulls may have pushed a little too hard.
Overall, the tone seems to be that corn yield will be adjusted down in the upcoming November Supply/Demand report while bean yields are expected to drift up. There is very strong buying interest below the market if we get a bullish report and bearish action. I would not be surprised to see big buying in the lead month Dec corn below $5.50 and it should be difficult getting lead month beans below $11.80.
Currently the price in China is over $18 for beans and 8.65 for corn. These prices have rallied with the domestic price in U.S. We are not seeing demand rationing at this time. There could be a transition coming in reference to the dollar. If we see a big shift in Washington in reference to spending, we could see a bottom in the dollar. This is something we will have to watch as the first half of 2011 unfolds. Bottomline: How high does prices have to move to ration usage? At this time it appears livestock usage is going to decline before ethanol and exports.
The supply reduction event due to U.S. crops should be factored into the market by late January. Therefore, the real action will turn to South America. If the crop is reduced, it will really get the bean market excited first. Bottomline: We are one event away from a Global commodity panic.
How will consumers react next year if unemployment persist and food inflation becomes very high? How fast will the administration react to exceptional bullish speculation in the commodity markets? Remember, when they start talking about it on national news and congress starts to have hearings we are very near the top.
Finally, how many acres will be planted to corn, beans, wheat, and cotton. Right now it looks like cotton and wheat are going to gain. If this happens how do we get the 4 million plus corn acres and 3 million plus bean acres necessary to get carryover back to acceptable levels. If we don’t get the acres does this mean demand slows down with price or will government policy set in and change the landscape?
So for you sellers out there we are going to have some real excitement and hard decision to make. How much profit is enough? We are currently shipping out a special report to all brokerage clients on how to approach this issue. If you are interested, it can be bought- Call 1-800-832-1488 for more details.
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