advertisement One of the most frustrating aspects of the market is that you can look at its history and at the fundamentals to develop a strategy—and it still may not be viable. Once a game plan is developed and you have taken some time to mull it over in your mind, you may find that your timing is completely off when you act on your strategy.
If you have been reading my corn comments, then you know I’ve been looking forward to the first of January as a period of bearishness due to first-of-the-year-cash-flow sales. During this period of time, which is normally considered a time for correction, you would have been looking for opportunities to buy calls or bull spreads to protect the anticipated 2006 corn sales at $2.50 to $2.60 this spring.
Well, I was right about buying the protection, but the low occurred last November. Even with a bearish December supply and demand report, the market has continued to rally most of December.
With today’s strong price moves, the December 2006 corn contract has been able to push above the psychological $2.50 barrier with ease and seems prepared to move to higher values. Fundamentally, you must anticipate the January supply and demand report is going to be negative, but it appears the trade’s attention is squarely fixed on the concern of lower corn acres and the potential for the dry weather to spread west. This, along with the anticipation of massive index fund buying, has allowed the market to push upward during a period of general expected weakness.
So what do we do now? The market is starting to reach basic value levels for 2006. Some would say December corn must move higher in order to buy corn acres away from beans.
Our recommended plan during the past few weeks has been to buy upside price protection now, in what we thought would be a period of weakness, then focus on selling in the spring.
Has anything changed? Essentially, no. We continue to believe if you are going to buy calls or bull spreads, you need to have them in place by late January or early February. If the market does not correct to allow us to reasonably buy upside price protection, we will have to adjust the selling strategy.
Give us a call at (800) 832-1488 if you are interested in developing a long-term marketing strategy. If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies for the 2006 marketing season, e-mail me at [email protected].
