Our Next Update- July 15th following the July WASDE Report.

Click here for the Introduction to Long Term outlook and Phase Analysis:

THESE COMMENTS ARE FOR CORN, RICE and WHEAT!!! 

General Comment :

Every time I write this page this time of year, I always say IT ALL DEPENDS ON WEATHER.  This time its different.  Conditions are such that even with perfect weather, corn, rice and wheat prices will stay firm and beans...well, there I don't have a clue.  You almost never see a demand market this time of year but here one is and what it means is a move higher into June and then we hit a supply side market issue with weather.  As I write this, the USDA says 149 is the average per acre corn yield and rice is up to 6900 pounds.  We will take their numbers for now but they could be too high or too low and it will make a huge difference.  So in order to look at the projected price movement, I'm going to go out on the limb and tell you what I think will happen and then tell you the odds of me being right. 

Price Outlook Next Two Months:

We will remain in a demand driven market into June and then will switch over to a weather market.  We cannot buy any more acres for this year but a higher price is buying more fertilizer and that will add to yield potential.  In 2006 I think we will have one very short term weather scare that could add 20 to 30 cents on corn extremely fast.  Obviously if we get a weather problem, look out as the market will explode but I think the odds of a real drought problem is slim and that is how I will trade.  So...over the next three to four weeks, I want to roll current futures positions into at the money or first in the money calls.  We may do several different strike prices as we spread the position out.   I expect to do this before June 1st to be honest but we'll see how the market trades.  As we go into August, who knows but a break is likely into the Midwest harvest.  If there is no weather scare, we will be selling cash corn and owning calls or option spreads as combines move into corn fields in the middle states of the corn belt.

Long-Term outlook: 

Remember, the market goes from Supply to Demand at the end of the year but this time, it will probably be different. I expect the demand phase to start by October and Maybe by September 15th.  Over the winter, plan on holding most of your corn crop either in cash or futures.  Basis will determine which it is.  I then look for the market to go higher into the first of 2007 as we buy every acre of corn we possibly can.  THEN...we will be looking to short corn into the spring and plantings report.  So one year from now, we will have ridden it up...now down and we will be talking about a drought situation AGAIN!!!  It is going to be a long...FUN year. 

Bottom line:  We remain bullish!!

If you follow this page, you know we have been long for months.  Most of you have never even seen me be bearish in the long term.  That is so funny because if you were one of my clients you would know I am a natural born BEAR!!!  I love being short the market.  I would always rather be short than long the market...ALWAYS!!!   It is the path to riches in the grain market; however, that has not been and is not the case on May 17th, 2006.  Why the huge change and trading against my nature...first, I like to be right and I like to make money.  Being short is a way to be neither.  China is a huge factor for me the last two years.  I can see the hand writing on the wall and have been saying it for 2 years.  Yes, some have laughed at me.  It is now I who am laughing from my swimming pool in the Bahamas (not really).   I don't know when I will be comfortable to again adopt by bear's suit and wade into the market on the sell side but I can tell you it won't be over the next few weeks. 

Finally - Soybeans :

If there is a weather scare, we will sell the tar out of beans.  Here is a market I can get short and like doing it.  If there is a weather problem later this summer, heaven help us a s beans could explode.  I am going to buy some calls in the next two weeks but they will be cheap and way...WAY out of the money.

The only hope for beans is for heaven to shut off the rainfall.  That doesn't look likely right now but things can change!!!

Dennis DeLaughter, CEO