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3 reasons to stay bullish

Jeff Caldwell 06/17/2011 @ 4:00pm Multimedia Editor for Agriculture.com and Successful Farming magazine.

Though it looks like it now, the bull run's not over.

Even though the corn market ended Friday just below its start -- with nearby futures right at $7.00 per bushel -- the markets took a decidedly different tone this week as a whole, trading well off the previous couple weeks' feverishly bullish pace.

Does that mean the trade's totally turned upside-down and the momentum's all downhill from here? Not at all...in fact, analysts say despite the week of sliding prices, you still have a lot of ways to nail down some major profits in the grains. How?

I) Got any old-crop corn 'gold?'

There's not a lot of old-crop corn rolling into the supply chain right now, a sign that a lot of farmers still holding on to old-crop are doing so because they think higher prices are ahead. At this point, that's a tough point to argue against, analysts say.

"The talk constantly is that anybody that has corn on-hand is golden," Joe Bedore, FC Stone Inc.'s CME Group trading floor manager, said earlier this week. "So, September is considered old-crop in the marketing world, this year. This means that if you have corn, it's going to be worth a lot. Therefore, I think farmers that have old-crop corn on-hand are not selling it."

II) Basis still 'very good'

The recent pricing action hasn't buried profit potential for corn, especially bearing in mind the fact that "there is still a lot of production risk ahead," says Agriculture.com Market Analyst Roy Smith.

"Even after this week’s action in the futures market, the basis on cash corn for immediate delivery is still very good," he said this week. "Years of experience tell me that there will be rebounds along the way. However, it is going to be difficult to not look back and wish we would have sold corn last week!"

III) Rain makes grain? Maybe not

This old adage about crop progress may not exactly be the case at this point in the growing season in some major crop areas of the Midwest -- those where recent rains already have every low spot ponding. For that reason alone, many traders and analysts say though the grains are trading lower now, there's a lot of talk about how the latest rains are "detrimental right now in a lot of areas," Agriculture.com and PFGBest.com Senior Grain Analyst Tim Hannagan said this week. And, as we move through the latter half of June, the tone could change abruptly.

"We need warmer days and nights to improve crops as well, as less rain to a more normal level," Hannagan says. That will come eventually as July enters. The near-term weather looks to encourage talk of a bullish June 30 acreage report."

   

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