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Suckers Serve

Agriculture.com Staff 08/21/2008 @ 1:31pm

Misty May and Kara Walsh won the gold medal in Beach volleyball last night at the Beijing Olympics. When the losing team is on its last gasp in ping pong, they serve to the opposing team (called ''sucker''s serve''), in this case, the Chinese team served to May/Walsh. In beach volleyball, though, serving is not an advantage - especially if 6''3" Kara Walsh is on the other team. If the serve is set, more than likely you have a spike coming down your throat that is very difficult to return.

This reminds me of the position market bulls are in right now. They are currently in charge of the market because the momentum has turned up in the short term, with corn prices spiking 90c in the past week and soybeans doing their typical 2x that. Even wheat prices are following higher in what is looking like either a strong recovery in a bear market, or as some bulls are saying (after 7 days of up markets) the beginning of a run to new highs. The ball is in their hands!

Problem is the US crop is getting so good (just like May/Walsh US team) that even if momentum is your way, it's difficult to win! In reality, the crop yield potential of the US crop has hit its highest point of the year (and still climbing) at 159 bu+ corn and 43.3 bu soybeans this week - near record large yields (just fractions of 1% below the 2004 highs)! Yet prices keep climbing following the negative USDA report last Tuesday morning. We have rallied corn 90c in the last week and soybeans 2x that, and the crop has improved in the past week by 1 bu/acre corn and 0.25 bu/acre soybeans.

It's amazing what these markets can do, but that is just what emotion can propel a market to do. We dropped corn nearly $3 in just 6 weeks from mid-June to early August, and now we might recover as much as $1.40 of that break - even though the crop has gotten even better in the past week! But that''s just trade, it doesn''t have to have anything to do with reality. In reality, corn wasn''t worth $3 less on Aug. 10 than it was on June 10 (more like 70c-$1 less based on our 4c/bu loss price models for every bu/acre gain in corn yield). We''ve gained 15 bu/acre of corn since June 11 (from 144 bu/acre national yield to 159 bu/acre today), so this is a great summary of what markets can do with emotion and momentum. The momentum is currently up, with next major resistance in corn at $6 Dec. futures. If we penetrate $6, the next real target is $6.50. This is no small market - be prepared for volatility!

Misty May and Kara Walsh won the gold medal in Beach volleyball last night at the Beijing Olympics. When the losing team is on its last gasp in ping pong, they serve to the opposing team (called ''sucker''s serve''), in this case, the Chinese team served to May/Walsh. In beach volleyball, though, serving is not an advantage - especially if 6''3" Kara Walsh is on the other team. If the serve is set, more than likely you have a spike coming down your throat that is very difficult to return.

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