Interesting that the USDA lowered the yield from an expected 160, not to 158, but to 155 bushels an acre. Acres planted increased 300K, but with this shocker, the market responded the only way it could. Limit bid all day, with expanded limits of looking at us on Sunday Night.
Bean yields were 44.4, but acres dropped 1.2 million. Beans rallied the limit, 70 cents to settle SX at 1135. The wheat settled limit bid as well, up 60 cents at 719.
Today is a perfect example of why i never take positions into big reports, unless I have a very very healthy cushion of profit. In general, its always better to step aside in front of numbers which can have such a devastating impact, if you are on the wrong side.
Right now, commercials who sold to the funds are there. As are end users who have not hedged for higher prices. Think cattlemen, hog producers, and the local ethanol plant. What is so sexy about ethanol if you figured in 380 corn as input prices, rather than 580?
A ways back when we settled CZ above 430, that suggested an upside target at 560-580. Here we are. I wrote that back in August or September. Interestingly, we are very much higher now on our corn.
Price rationing, is the effect of higher prices.
The next year if not next 2 years will be spend digesting these numbers. With Cotton at 15 year high, 800 wheat, 600 corn, can 13 dollar beans be far behind?
Gold making new all time highs, the dollar at a new 9-month low. All combines to a gigantic bowl of RISK. Throw in volatility in the crude market for good measure.
Risk equals opportunity, so there should be plenty of interesting moves to take advantage of in markets in general as we head into the future.
I like the Dow cash testing the 11,000 level. Look at the April 2 year high at 11,280 to beckon as a target for the bulls. This market rallies against the wall of worry. I will start to look for the exit, when we see the bulls out on the cable shows. We are not quite there yet. But its getting late in the day. I would be pricing cheap out of the money calls on a spec looking for a healthy 300 to 500 pt break in the Dow.
As for the grains, we need to have an exhaustion top. I do not think we are close yet. We may get it this week. I depends on how willing the funds will be to take profits and sell their long positions. Right now they are squeezing the commercials and enjoying having their foot on the commercials. I think this next week of trade will be extremely volatile, with more surprises to come.
I’d want to buy dips, but I’d also be looking to run at the first sign of major heat on any position.
Volatility will rule. Decrease the size of your bets and remain patient.
We will be open Monday in the Grains, so I may have some more thoughts then on the markets. All I can say is after 20 years, the grain market still shocks me occasionally. This was one of those days.
Have a great weekend.
