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Closing Corn Commentary - December 18, 2009

Agriculture.com Staff 12/21/2009 @ 9:30am

Corn:  It was the dollar acting as the trump card once again. Just as we saw yesterday, the first hour of trading was dictated entirely buy the buying found in the dollar. Overnight, was positioned correctly being higher given the fact that both the crude was on a bounce and the dollar had settled back down slightly. Just before the grain opening buying ramped up in the dollar not only causing a lower opening but also selling the crude back. One US firm put in their two cents with a yield estimate of 164.5 coming in well above USDA (162.9) as usual. Corn has been reluctant to move, however leaving it just a penny higher on the day when all was said and done. This market does not want to try new territory easily either higher or lower. As was mentioned, if fund buying does show up it will take most of that support just to get back to the highest levels of hedging we have done so far. On the bullish end JPMorgan released new numbers for its estimate of index fund rebalancing. They suggest in January we will see 62,434 new longs due to rebalancing. Right now the highest floor we have been able to put on was a 440 floor with a 520 ceiling. That trade giving us protection down to 300 could have been done for 10 cents at the highest point we have recently seen. Today, that trade would have cost 22 cents to put on. This goes to show the amount of buying we need to get back to that level. It is not that the corn has set back drastically. Technically, it is in the middle of the sideways range. We have found support at the same level we found on November 24th. Shortly after that we were back near 420 in the March. Let’s hope that front month buying shows up again so we can get more hedges on. If it does, we need to be very aggressive sellers at that level. One catch to this fund buying idea is that they have not been known to buy with higher dollar moves. There is little doubt we need a break in the dollar before expecting funds to arrive with support.

Direction: Once again corn settled right in the middle of the sideways range. On a move to 380 we will be buyers around support with stops close by. On a move back to resistance of 420 we want to be aggressive hedgers. It may even be possible to lower our ceiling slightly to put on the hedge for a lower cost. We are going to need good fund buying to get the floor on, the buying to reach our ceiling would take a major spring rally…Ryan Ettner

Trade Idea(s):

  • (12/15) Sell Mar 415 OCO buy 382, risk 12 from entry, objective 25 from entry.

Option Strategy(s):

  • (11/19) Sold Jan 450 Call/sold Jan 390 Put 14, risk at 9, objective 0. Closed 2 3/4.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

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