Sunday, September 30, 2012

What did Friday's report do for the price out look for grains?

What did Friday's USDA report do for the price outlook for the grains?

My opinion is that we really opened some doors to possibly much higher prices in the future; but before one gets too bullish we still need to have a couple things happen.

First off we can't see a bearish report on Oct 11th; perhaps something that explains the bullish report we seen on Friday when the USDA came in well below trade estimates for both corn and wheat stocks.  From what I have read the most ever below a trade estimate.

So I think our first risk will be some weird Oct Supply and Demand report that explains a little what happened in the last quarter.  Perhaps there will be no explanation and in that case we still have some risk.  The risk being yields come in much bigger then expected or demand is cut more then expected.  I could see a little bounce in yields just from human nature of over reacting and the fact that it seems like yields are slightly better then expected; but are they better or worse then what the USDA expected?

If we can get by the Oct 11th USDA hurdle; or next or perhaps day to day hurdle will be the outside markets and global economic picture that can have just a huge influence on what is probably the biggest fundamental factor out there.  Money flow via the funds; we don't need to give them a reason to step aside and put money under a mattress so to speak.

Next and probably what most important is going to be demand.  Stages are set for a very tight starting spot for corn and the wheat feeding the last quarter was just huge and we all know the soybean demand situation that has us just a few short weeks into the current marketing year at nearly 80% of goal.

So if demand isn't curbed, and if it can stay strong and pick up some speed (especially needed for wheat) then the upside potential was really opened back up on Friday.

Where could we go?  Hard to say as I mention above there are some hurdles that need to be jumped first; but if we can get past them the area we could go is that area where demand slips or ECON 101 jumps in and fixes our problem.

As for marketing we need to realize that the market will fix it self and the stuff I am referring too isn't new news; it's old and potentially built into the present price.  So as always use a game plan that leaves you comfortable and spreads out and protects your risk should one of the unknown black swans come up at any time.  Bottom line is I would be playing things from the long side but at the end of the day using risk management that is taking risk off the table at good profitable levels is just what a person is suppose to do; with the present outlook should one be a little slower in making sales.......probably..........but don't do nothing either; be pro-active and manage risk.  Keep in mind that many that buy corn as example can't buy it and make money; don't still have nothing sold or protected should we see producers - end users profit roles reverse.

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