Who let the bull out?

Happy Thursday from dreary Mifflintown. The crop report is out and behind us. Now it is the market's job to convince farmers to do what it wants. Right now the market is hunting bean acres and adding some risk premium as our carryout is not burdensome. I just put some new charts on my website this morning pointing out the technicals as the market sets up to make a charge higher. As I stated and state again, I am not crazy bullish, but friendy. We are having a feel good rally as the market is trying desperately to convince us that the worst is behind us. Remember it is the markets job to take as much money as possible from the majority of participants. Right now, the stock market is courting us into thinking that the light at the other end of the tunnel is not a train coming the other way but sunlight. We shall see. J

From the bear camp, I point to continued abysmal feeding margins in hogs and cattle. Ethanol margins are now nonexistent and this is the real sore in the corn market. This is why I believe that the rally should have trouble getting real legs. Real bull markets stem from strong demand and our disappearance is off 10% y/y. I realize the stocks to usage ratio in historical terms is tight; however, virtually none of the buyers of corn are making money and this is a problem for the corn bulls. Yesterday the big news of the day was EPA's announcement delaying their decision on higher ethanol blends until next year. Minus one for Sec. Vilsack. Pro Exporter released their 9/10 stocks @ 1.691 billion bushels which is on the higher end of the range.

Trade consensus is building for the acreage reported by the USDA will be the smallest reported of the year save for major weather and the market is going to bring in an additional 2 million acres. High prices are the best fertilizer for big crops, low prices act as a retardant. Low prices forced acreage on the fringes to be taken back out of production. Remember last year we were hunting for every last acre available for row crops, this year we can afford to idle some of these acres. This is as Martha Stewart says, "is a good thing".

So what do I expect:

I expect grain prices to continue to drift higher as we enter the planting/ growing season. Users should have good coverage for the next 90 days.

Look for the energy complex to break out to the upside on a convincing close above 58/ barrel.

See top side resistance for corn @ 4.25 futures, 10 beans and 5.60 wheat.

Have a great day!

 

JH