The corn market has developed a pre-planting seasonality over the last seven to ten years that has been pretty consistent. The play typically runs as follows. Speculative and Index buying begins before the spring planting season gets underway. This leads to a premature run up. The early speculators can’t afford to hold their positions the way the index traders do. The speculators tend to get washed out on the last downward move prior to planting season hitting full swing.
The 24-hour news cycle keeps all plugged in, all the time. As a result, traders are constantly inundated with current news and pending developments that rarely mean much in the big picture yet are reported with such earnest conviction that we probably pay too much attention to the noise and not enough to the actual research based signal.
This morning’s corn trade fits that description. It’s too early to play the spring planting fears. One look at the commercial traders’ position in the corn market quickly illustrates that the movers and the shakers in this market are negative with increasing conviction. They’ve been net sellers in each of the last six weeks and have pushed their net position into the short side of the ledger. This morning’s grain rally is politically driven. Hopefully for everyone’s sake, things in the Ukraine will stabilize. This would mark the high water point for the pre-planting rally and the market should decline over the next month as commercial traders cover their short positions and re-evaluate their 2014 planting scenarios.
