A question i get asked a lot is “how does my marketing average compare to other people you work with?” Most people want that answered in terms of the price they get compared to others but I have come to realize there is a more important way to measure the success of your marketing. Marketing is way more of a psychological exercise than a mathematical one. I believe the people I work with that are most successful at marketing are the ones that make the decisions and then move forward rather than agonizing about what they should or could have done. Now this is much easier said than done obviously but it seems like better decisions are made when your mental capacity is pointed into the future rather than kicking yourself for decisions evaluated with the lens of hindsight. You need to learn all you can from past decisions to get better at decision making, but you should not spend too much time dwelling on it. As is life, it is very difficult to find the right balance. I have more to say about this in later weeks but will stop for now to discuss the markets. I think that is a necessary introduction since we feel like we have been hit by a truck out of nowhere in the markets this week.
What The Heck Happened
I do not have just one main cause I can point to explain this correction in the market. USDA was not negative, the closure of the Mississippi river should not affect price that much, China is continuing to buy corn, and there is some rain in the forecast but not enough to fix the deficit. . The market was certainly overheated and due for a correction but I do not mind saying I was not expecting this deep of one. With most of the growing season ahead, demand so strong and razor thin projections for carryout I will be even more surprised to have already printed the highs in these markets. That being said, we need some help from the weather to push the markets back to those highs. If we get good rains across the entire belt for the rest of the growing season, I think we will print the highs before June 30th. But with carryout so tight, a weather problem in even a small area is going to really spook the market (see what happened when the safrinha corn in Brazil burned up).
The market was going up so fast every technical level we looked at got blown through. Now that the market has taken a breather, we can start looking for levels to sell again. $6 dec corn and $14.50+ nov beans are still in reach with weather. We can start thinking about buying some calls. If you have calls bought, you can be more willing to sell knowing you will get to participate in upside if the market runs to new highs. A well known analyst said that higher prices were not going to buy any more old crop corn as no one was willing to sell as fast as it was going up. He said it would take lower prices to buy more corn as the market needs to remind everyone it cannot go up forever. The demand is still here, USDA just reported another big sale to China today. We need weather to help bring the buyers back.
As shocked as I am by the weakness in corn and beans, I am equally shocked by the relative strength in wheat. Chicago wheat especially should be following corn more closely. The winter wheat crop is close to being made, there is not as much weather left to affect it. Spring wheat is what is threatened by the growing drought area. Right now, wheat is running higher relative to corn which makes feed wheat less attractive. Old crop corn basis remains strong. July corn is old crop while july wheat is new crop so it should help that spread come back in.
USDA report was relatively bullish for cotton but it could not manage to capitalize on it. Now the forecast has added significant amount of rain to Texas which will save some of the dryland cotton. Cotton gets pushed more by spec money than the grains and with the rains falling in Texas that adds to the pressure. Cotton still has a bullish story.