This is shaping up to be a whether market, not a weather market. Are we seriously going to have a drought this year? With fields in MO and the Dakota’s looking more like Rice Patties in Viet Nam, are we really still looking at a drought? Or will the dryness in the south eastern states prevail? This uncertainty has us in a sideways chop. The large speculative commodity funds are still short 45K Chicago Wheat, Long 30K corn and long about 20K beans. Hardly anything to write home about. Once again, I think its the computer programs, squeezing the life force out of these markets. Markets once moved liked living breathing things. Now they resemble living breathing things periodically taking hits of crystal meth. The high is snapped back by an even more depressing low, but we can’t even get a good bear market going either.
Instead, we have a couple of weeks of rally’s followed by ugly snap backs lower giving us all whiplash.
Will the June 30th number hold surprises? I think if it does, it will be a bearish surprise in the corn. Planted earlier than the beans, and for the most part taking copious quantities of water over the past 6 weeks, its hard to fight the old notion that “rain makes grain”. I think, if given a choice, most farmers would rather have too much water in June rather than not enough.
If the acres adjust and show an increase greater than the 2 or 3Million extra that the trade has priced in, we could have one final, agonizing puke lower.
Farmers sold into Dec Corn at the 395-397 at the end of May. Again, just days ago, they didn’t miss an opportunity to put the kibosh on the rally from 355 up to 387. Apparently 387 was close enough for horseshoes, and instead of waiting for 399, farmers stepped in and priced much of that old, 09 unpriced grain which has been festering in the bins.
Its looking like that will be the case. My guess is they sold 1/3 of their stocks in May at the 398 level; another 1/3 just recently at the 385 level: If given another chance, will sell the final 1/3 if and when we break below 350 one more time.
At that time, when the old corn is finally priced, we may find support. Of course, a break below 355 opens the door up to 330, 313 and then a full on panic crap fest down to the 300 level.
Farmers being human beings, and humans acting irrationally at market bottoms and tops, I am sure when my clients call in asking about speculating and selling corn, that indeed, they will be selling it in the hole. All we will need to put the cherry on the bottom will be bearish stories on CNN, or a classic Newsweek or Time Cover…. Something like a farmer standing next to huge over flowing bins. When we see that, take the 401k money and get long corn…
If we can’t get some traction here in short order, CZ will settle below 355 like grease through a goose.
The beans are a different story. They tend not to enjoy sitting under 4 inches of warm water filled with mosquito larvae. This rain, if it continues to fall, will have farmers building arks in their bean fields. There is still a lot of time, and its hard to kill these beans. Farmers looking to sell $10.00 beans may have missed their chance for the 2010 crop if they didn’t sell em back in early January, before the USDA number on the 11th. SX was at 1005 back then… Remember that?
One thing we have not seen yet, and remains to be the wild card, is true speculative fervor in the markets fueled by the commodity funds. The investment world gave us a huge rally this year, in fact, over the past 8 months, in the cattle and hogs, largely due to fund buying.
Where are the funds in the grains? Laying low so as not to attract Washington’s attention is my guess.
Goldman seems to have parsed its activity to a large degree, after its public flogging at the hands of populist/left-leaning members of congress and the Senate. Will 2010 be the year with out a Santa Clause? Because make no mistake about it, the funds are Santa Clause for producers. We would not have had the markets in 2003 through 2008 with out the funds. If you are a producer, you best hope they haven’t just taken their ball and gone home.
Good Trading