Heil Harvesting, Ulysses KS/Limon CO | Here is how I see it:
I am not calling to 2$ corn again but the corn market has flat priced itself out of reason. It won't work, talk to an ethanol guy, talk to a cattle feeder. 5.50 corn doesn't work. The feeder stops buying (which many smaller feeders <15000 head have quit issuing bids). Energy will come down as a result of the economy weakening, 80$ is very realistic for oil within the next month. That is plenty enough reason for the funds to bail.
It is NOT demand but funds that are now driving this market. Period. No question, pure statement of fact. Corn demand price, probably the mid-4s. That we can argue about. The thing that is not arguable is the fact that the funds will bail out of this market so much faster than they got in if they see any reason to do so. Locked limit down fast. The price will go past equilibrium (demand level) and then eventually find its way back to that point. You should definitely do something for some downside protection, hopefully you will never have to exercise it, but if you need it it is there. Buy a put. Buy a put, sell a call. I do not care what you do to do it but do something.
A limit down day in corn is 20 bucks an acre on hundred bushel corn, big, very big, now couple that together for 3 or 4 days you can't get in the market and no one will issue a bid (because they can't get into the futures to protect their butt) because we are locked limit down. You could easily look at 80 bucks an acre off the table.
Dec Corn:
A guy can get into a 510 floor 610 cieling spread for around a quarter, so floor at 485 cieling at 585 after premium. IF you do not like that for a dime a bushel to put a floor under at 480 and and a cieling at 6 bucks.
I am not advising to short the board, and I could be all wrong about the funds bailing. History would sat it will happen at the first legitimate sign of weakness though. I do not know what the market will do, neither does anyone else. but to say the sky is the limit and corn is at this level due to demand, so it will stay is plum stupid. |
6.50 are you out of your damned mind????
