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Not the time to panic

Agriculture.com Staff 03/30/2007 @ 3:08pm

The long awaited March Planting Intentions report was released Friday, with little earth shattering news at first appearance. Corn plantings were up, but within the range of guesses. Soybean plantings were down, but also within the range of guesses. Normally, it takes a number outside of the range of "expert" guesses to be a real shocker to the market. Not so this time. You all know the story of what really happened.

There are several possible explanations for Friday's prices. Most likely is that traders had built a corn number into prices that was smaller than what they acknowledged. With new crop corn futures already at historic highs, it is easy to see how they could have been thinking a number much smaller than they got Friday.

With corn futures locked limit down, soybeans were unable to be positive. The wash out there was not as big as corn, but still a bad day considering the bullishness of the report. Maybe speculators were finally seeing the size of current supplies and adjusting the price accordingly.

When markets are limit up or down and not trading, options can give an indication of where prices would have gone if trading had been allowed. My December $4.00 put option that I bought earlier in the week for $.36 started the day at $.39 and closed at $.53. That move of 14 cents is a delta of $0.07. I don't know if that is high or low, but a move of 14 cents in corn options is way more than we usually see in one trading session. It makes my put option purchase look really smart.

Someone asked me today if they should go ahead and sell anyway. Today is not the time to panic. Last week would have been better. Since that is past and not possible, I suggest waiting. The planting numbers and stocks were not all that negative. After this shake out, there will probably be a rebound. I look for a retracement of 50% of the move lower. It could come in a few days or considerably longer.

The whole growing season is ahead. There will probably be more than one shot back at higher prices. The normal time for the spring high is the first week of April for corn and the first week of May for soybeans. For each, there is almost always a rally as the market tries to evaluate growing conditions. Wet weather in the eastern Midwest may delay planting. There are all kinds of unknowns coming in the next several months. Keep your marketing plan handy and your finger on the trigger!

The long awaited March Planting Intentions report was released Friday, with little earth shattering news at first appearance. Corn plantings were up, but within the range of guesses. Soybean plantings were down, but also within the range of guesses. Normally, it takes a number outside of the range of "expert" guesses to be a real shocker to the market. Not so this time. You all know the story of what really happened.

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