Ride the rallies but be prepared for the bearsThe month of December is noted as a tradable month and one that tends to not be trendy. The recent rally in corn should come as no surprise since corn has declined $5.095 from the high. Too much in a brief time.
By: Sue Martin, Agweek
The month of December is noted as a tradable month and one that tends to not be trendy. The recent rally in corn should come as no surprise since corn has declined $5.095 from the high. Too much in a brief time.
When the economic landscape is stagnant, low corn prices at this time will not allow for an increase in corn acres. The most notable change will come from the marginal land areas. Farmers there just can’t afford the input costs and take the risk of poor yields because of weather under a cheap price environment.
I suspect that the rally of this past week was stimulated by the extreme break, harvest hedge pressure abating as a result of farmers finishing harvest and the shorts wanting to cash in.
Commercials know that they need to now bid for corn before the farmer locks up the bins or he won’t get corn. This market is in a two-sided mode. We quite simply have too much wheat around the world and corn no longer enjoys that demand sector like it did last year.
Weather in South American has been tenable and will keep traders on guard as the New Year comes. The oilseeds are enjoying plentiful supplies and therefore will compete against soyoil even though the world stocks tightened a bit in this week’s report.
Canada has good supplies of rapeseed. The U.S. continues to export biodiesel into Europe in competition with rapeseed and its biodiesel industry. That’s good for U.S. producers but, not good for European producers.
The bottom line is for producers and traders to be flexible and take advantage of profits during the rest of December. We no longer are in trending markets.
Furthermore, the potential of a weather market for South America after the first of the year will give opportunities to make some cash sales if that occurs. Enjoy the rally if that occurs and remember that with oilseed supplies not tight and the prospect of increased acres this coming season, the bears probably will rear their heads once more.