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After the heat wave, then what?-Ron and Sue Mortensen

07/22/2011 @ 7:02am

With the end of the massive heat wave in sight, the markets have paused to determine the next move and discover what damage may have been done to the Midwest corn and soybean crops.  This will take awhile, with traders focusing on the Monday crop condition reports and anecdotal reports about the success or failure of corn pollination. 

The wheat crop in many corners of the world continues to be a day to day influence.  Today, it was a more negative influence, as there were comments regarding an increase in exportable supplies from Russia and the Ukraine.  These countries have the cheapest wheat available in the world. 

Regarding the heat we are experiencing, the month of July has the potential to be one of the hottest in recent history.  This is yet another reason for anxiety regarding yields.  The Drought Monitor shows abnormal dryness in northern Illinois, as well as small parts of Indiana and Ohio.  More anxiety!  Just mention that good yields occurred during cool summers, like 2009.  Even more anxiety!

The comments made last week regarding option purchases still apply.  Purchasing put options, for example, may allow you to protect prices on more grain than you would otherwise be comfortable selling.  It may be a strategy that lasts a few days or a few weeks.  If you sell more grain, sell back the put options.  If there is another round of searing heat, sell them back if you are convinced prices will make new highs.  If not, keep the puts and see how the market handles the improved weather. 


 The risk of loss in trading commodities can be substantial.  You should therefore carefully consider whether such trading is suitable for you in light of your financial

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