Friday, July 15, 2011

grain marketing comments 7-15-11 drought to send us to new highs on corn or is now just the best time to sell?

Markets are called mixed today with row crops showing strength in the overnight session while wheat was lower in MPLS and CBOT while KC wheat was firmer as our markets appear to be consolidating waiting for the next catalyst to help determine price direction.

In the overnight session we seen the grains end up 5 cents for corn, up 5-6 on beans, KC wheat was up 2, MPLS wheat was down 3, and CBOT wheat was off 6 cents.  The overnight session was rather choppy in price action; CBOT wheat had about a 19-20 cent trading range and corn had about a dime range.  At 9:20 outside markets have the US dollar slightly firmer, equities have turned in the red after being stronger when that market opened as presently the DOW is down about 26 points, crude is up about 80 cents which is about 80 cents or so off of it’s highs seen in the last couple of hours.

The price action has become weather driven; present forecasts call for hot and dry during the pollination period for much of the corn belt as a ridge forms covering most of the corn belt; no sign of forecasts removing the ride yet.  Keep in mind that right now the rally is a fear driven rally; perhaps with the strong basis we see on the grains we can say that part of the bounce is fundamentally backed but the main thing in the market is adding premium due to weather.  That premium will continue to grow if the forecasts stay hot and dry; while it can quickly go away if forecasts change.  In my opinion as well as some others that I have seen the heat probably isn’t as big of an issue as it might be in many years because of the very adequate moisture most areas have going into the hot and dry area.  So unless it turns hot and try for a very long extended time we are probably just seeing a spot that when we look back is a selling opportunity.

The one good thing that we have going for us is that basis on all the grains is firm and on some of the grains and cash markets is at or near the best levels seen in many years if not all time.  So that says something that our fundamentals are helping to support our markets in some manner.  As long as the fundamentals continue to feel supportive rallies in the flat price are possible while our risk becomes and has been the outside market along with the fact that we simply have a very high percentage of the market participants who are bullish; eventually we will run out of buyers.

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