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Has the bull market run its course?

Agriculture.com Staff 03/05/2007 @ 1:47pm

Has the bull market run its course? Can the corn market come back? These are some of the questions farmers are asking these days in the coffee shop and in the Agriculture Online Markets discussion group.

The answers are ultimately unknown, analysts say. However, outside forces, such as lower world equity markets, causing the pullback for corn, will diminish, analysts told Agriculture Online. And some observers say that the market has only hit a bump and is headed higher.

After peaking a week ago, May corn lost $0.36 from peak to valley, May soybeans lost $0.68, and May Chicago wheat lost $0.46.

The market pullback is being blamed on the stumbling Asian and European markets. The setback has been bigger than expected, but as soon as the world equity markets find stability, the bullish corn fundamentals will kick back in, Bill Gary, Commodity Information Services, said.

"The fundamentals for corn remain bullish," Gary said. "I think after the March reports come out, such as the Planting Intentions, I think corn will take off and we will have a sustained advance."

Gary added, "We're still looking for a price of $5.00-$5.50 for summer corn. As the market chops lower, this is a time to buy some positions back. It's a price area where you can accumulate long positions again."

"We're shaking people out, but that is typical in a big bull market. You shake weak long traders out. These trend following funds go short as well as long the market," Gary said. "They are just liquidating."

Gary sees these same trend-following traders giving the market its needed fuel to head back up again.

Until then, Gary sees May corn trading as low as $4.00 corn. "I wouldn't trade at that level and I wouldn't sell corn at this price, anticipating the market going to $4.00," he said. "In fact, we are buying corn. We're going to keep buying corn on a scale-down basis."

Mike Krueger, World Perspective Inc., agrees the corn market is gearing up for a run back up.

"I don't think the bull market has topped out at all," Krueger said. "The market needed a correction, it was overbought and had run pretty quickly to new contract highs. But, I don't think we have seen the top in the corn market yet."

Because of a lack of evidence that we have rationed demand, and no clear signs of a slowdown in buying, Krueger doesn't think the markets have gotten high enough to shut off demand.

"Also, I don't see that extra 10-12 million acre increase in corn that is being talked about. Plus, it's too early to say the market has peaked when we have to see what the spring and summer weather is going to be like."

Krueger said many of his clients are 30%-40% marketed at the current price levels. Therefore, "We don't see any reason to be extending coverage beyond that level of being sold."

John Roach, Roach Ag Ltd., said, in his daily newsletter, the question on many farmers' minds is, "Has the bull market run its course? "Certainly it is possible, but I don't think so, Roach said. "Although the markets can liquidate further giving us lower prices near-term, but I expect several high price peaks ahead."

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