Over the weekend, the trading community was shaken as the number five financial institution Bear Stearns was found to be in trouble. Its stock value one year ago was $172 per share and was sold to J. P. Morgan over the weekend for $2 per share. The bad news here is the vulnerability of such a well-regarded institution has sent shockwaves to the international financial markets and its commodity holdings. The good news is two fold. Number one is to know someone of JP Morgan's size and stature is willing to catch a falling knife and number two is the fundamental big picture on the grains has not changed, as world stocks of corn and wheat remain parchment paper thin with steady demand. It is said two other major world players capable of catching any other falling knives are Goldman Sachs and Barclays. In response to this news, the Federal Reserve Board announced that they shaved another quarter of a percentage off of federal funds interest rate. This was somewhat of a surprise as their regular meeting is today, March 18 and we may see yet another adjustment.
Financial institutions mired in the sub prime debacle are liquidating commodities, attempting to regroup. The weakness is most apparent in the soybean oil and then into soybeans. Fundamentally, little has changed for corn other than another day closer to the South African and Argentine corn harvest. China has announced it will buy 4 million tonne (158 million bushels) of corn from its farmers in the key northeast corn-growing region. Demand has been running weak from a less than inspiring hog production market and China wants to make certain its framers have a reason to be aggressive in corn plantings this spring. The United States ending Stocks-to-Use are at their third lowest dating back to 1980, world Stocks-to-Use are at their lowest ever in history.
Technically, July corn has immediate technical support at 5370 and resistance at 5854, trend has turned down. The December corn futures have technical support at 5372 and resistance of 5850 and December corn's trend is also headed down.
At Monday's stage of progress, knives are free falling and those with only the deepest of pockets may be willing to step into to buy. Technically futures are weakening, but long-term Allendale remains bullish to old and new crop corn given our outlook for reduced corn plantings in the spring of 2008. It must be noted that the days of old crop corn stocks on hand, numbers 41, the second lowest figure dating back to 1999-2000. For the immediate time frame, we are willing to sell a corrective rally but will utilize a risk reverse just in case funds are willing to jump back in on the long side because of the strong fundamental outlook.
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