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Published July 06, 2010, 10:05 AM

Time to focus

Should beans turn negative it could pull corn backwards for now. Can you imagine what the corn will do if a hot, dry weather market were to occur? Corn would go for $5. However, one step at a time.

Should beans turn negative it could pull corn backwards for now. Can you imagine what the corn will do if a hot, dry weather market were to occur? Corn would go for $5. However, one step at a time. Per recent recommendations, vs. cash corn sales, the call spreads in the December or outright calls in the September should look wonderful as of June 30. I really liked the call spread as it would only take 5 cents to be in the money and June 30 had 25 cents profit (in the money). For corn to close limit up, I would think soybeans need to close higher. Now, May close was 907¾ and the close at the end of last quarter was 918. A close over 918 would be closing higher for both the quarter and month. After having made lower lows this quarter and for June, it would portend another look at the last quarter highs. But buyer beware — should this market take out 886¾, the 878 to 879 level will become quicksand. So, you know where your risk is.

Another fundamental that we need to watch is the Standard & Poor’s and the world economy. Traders are watching Spain. However, remember the fund that was put together at the International Monetary Fund is to take care of not only Greece, but others in the European Union that may be in trouble.

Now, what about corn? I suspect that the market is owed another day up. Then with the long weekend, some profit taking.

Unfortunately for December corn, it cannot close higher for the quarter as of June 30 even at limit up. The close at the end of March was 376¼. June 30 trade encompassed the previous five days of trade in December corn.

Rand bought 500 September 380 calls at 14 June 30. Remember they were along with JPMorgan buying large amounts of the December 350/400 call spread. I would suspect they are bullish?

September Chicago wheat made new highs for the June. It had resistance at 494 June 30, which is on a top parallel channel line from the lows. While the wheat was bearish in the morning’s report, it held no surprises as everyone has been loaded short in this market.

I think with time, wheat will become the new gold market. It is still early. People tend to eat more in tough economic times. And, if world economies slow again, we supply will wheat in food-aid programs. And, if you can’t afford meat, you can afford bread.

The world is growing in population by leaps and bounds. Wheat is one market that can go from large supplies to tight supplies in a year’s timeframe. Note, September wheat closed at 475¼ at the end of May, and at the end of the last quarter, September wheat closed at 480½. A higher close June 30 over 475¼ could be a good sign for this bearish market.

The shorts have been in this market for a long time and when markets quit declining, they will want out. Now, I think there is a possibility of another decline in late July for a late July low? Now the Standard & Poor’s September has an outside range reversal quarter going with a lower close in the cards. We took out February low June 29 by very little. This normally would see a close near the low at the end of the session.

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