Grain Angles: Tight supplies support market

September 26, 2008 03:07 am

— The U.S. Department of Agriculture did not disappoint those who thought the corn and soybean yields were higher than most believed in August.
Probably more important is that the worldwide supplies of corn and soybeans are tightening up. The surplus of U.S. corn stayed around one billion bushels and soybeans at 135 million bushels. Tight supplies are supportive to the market over the long haul, which is difficult to realize when the market is as volatile as it has been this year.
The positive response of the market has put corn and soybeans on the rebound. It will be important to see if the market follows through in the next month or so. December corn is still 24 cents less than two weeks ago.
The day of the report resulted in a limit-up day. The market has established that $5.20 to $5.30 is a key support area. The market has tested this area twice since July and it continues to hold. This is a key area when developing a plan to deal with new crop corn. The same price support should be found in any month that you are looking to sell in. We know the top is around the $8 mark no matter what month you are selling in.
The volatility will continue and it is a good idea to not get too aggressive in selling the remaining new crop as well as the 2009 crop. The idea of trying to sell corn at the top of the market is not a good one because it is difficult at best to pull that off. There is a well-defined range and it is up to sellers to determine what level they are willing to sell at.
World supplies are tight so too aggressive may not be the best idea.
The supply of U.S. soybeans is tight at 135 million bushels. The USDA cut the national yield by one half bushel since the August report. November soybeans remain $1.22 below where they were two weeks ago. The trade on the day of the report was not a limit-up day, instead a modest gain.
The market is trying to turn its attention to South America where the world’s soybeans are grown. The old crop basis would lead me to believe that in this time just before harvest processors are trying to shake out the last bushels of soybeans.
The basis levels have gone to the positive side and it is a good time to be selling any remaining soybeans. It does not make sense to hold old soybeans into the new crop pricing period. New crop basis levels are improving which is good to get some more new crop soybeans sold this fall, after Thanksgiving and before year end.
There is not carry in the soybean market and processors need them now. They are not going to pay you to hold them. An aggressive sales approach might not be the best idea given the tight U.S. supply and not knowing what the South American crop will be like.
The market that we are trying to deal with is influenced by a number of things from the outside. There will be times that the supply and demand will have little to do with market activity. We need to be aware of what a stronger dollar will do over time.
There will be a new President and policies will change without any doubt. The cost of production has sky rocketed which puts more pressure on to make sales and not wait too long to make sales.

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