I have to admit that 66 points doesn’t seem like a lot. I really thought we would get that print on Friday. Now we will have to wait until Monday. I still think the number gets hit with sell pressure the first two times we print there. After the third time, we should rotate up, and explore the space, so to speak.
Grains look suspiciouly weak heading into the Wednesday Planting intentions numbers. Remember the funds are short wheat, long corn, and only slightly long beans. We will see some evening up of these positions going into Wednesday. Monday and Tuesday may give us a spike down in the market, fueled by longs who have been so since the beginning of the year.
Goldman came out with a rec for 5 dollar corn at that time, and then promptly watched as CH dropped 77 1/2 cents for a Happy New Year Facial. And I don’t care who you are, no one likes losing close to a buck bushel on a spec trade. But, we will always wait with bated breath. The proverbial “The Duke’s know something>> I’m getting on board..” Very often leads to cries of “Where’s Beek’s” when the trade doesn’t go as planned.
Will they stay long and wrong? Wednesday morning will give us an indication of the real state of affairs as we look at planting for the 2010 crop. Where will the 6million acres of winter wheat that didn’t get planted migrate to? If the weather is good, will farmers just keep planting corn until they can’t plant any more?
Only time will tell.
We may have a classic, sell off before the bearish number. Everyone tries to sell further on Wednesday’ morning, only to find that there’s no one left to buy. At that point the market could snap back higher in response to a the bane of trend traders—-lack of follow through.
If every one’s short and the number is bearish, and we don’t open sharply lower, nervous shorts will begin to pare their positions, which could result in a snap back higher. Traders may be “right” fundamentally, but still be faced with losses if the market adjusts sharply against them. Being right in that situation is not as important as managing the position.
If you are a producer, surprise down moves are your Achilles heel. As a spec trader, being wrong goes with the territory. There’s always a way to flip and survive. If you are a producer though, once you’ve committed to your acres, you can’t flip your cash position. You are long, for the duration. Your only salvation is having protection if you haven’t sold forward at your elevator.
Higher prices are easy to deal with. Lower prices, not so much if you haven’t planned for that possibility.