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THE WINDY CITY TRADER
P.O. Box 673,
Chicago, Illinois
(June 10, 1997) GRAINS: The grain markets continue their volatile ways. Corn and wheat have stabilized somewhat while the soybeans, meal and oil all reached new lows for this move. Beans broke on a number of factors. Recent warmer temperatures in the Midwest have given the plants some much needed dryness. This should continue for the next five days (forecast for 80 degrees and mostly sunny) followed by helpful rains by the weekend. This caused July beans to drop to $8.05, July meal to 263 and July oil to just below 2300.
The new-crop November is holding up nicely however as demand remains fairly strong. We still like the long side of November beans on a pull-back to recent lows near $6.60. China continues to be a strong buyer of beans and meal. December corn has reached near $2.50 on three occasions. We may test this area again soon on the recent forecast for warmer weather. However, this contract will be hard pressed to break much under $2.50 for a number of factors. The trade is aware that the least hint of a weather scare will most likely cause a limit up scenario for 2-3 days. At most, we feel the market could break to $2.40 to $2.45, so a sell at the low $2.50 area is very risky. You are risking an unknown amount (Corn was at $5.50 in early '96) to possibly make 10 cents on the short side.
This is why this market rebounded sharply each time it neared $2.50. A buy near that level, we feel, could offer a potentially good return for a relatively low risk. We are watching the wheat carefully right now. The $3.50 level basis July was good support.
This market might trade a range of $3.50 to $3.80 during the next month.
Stephen Connell and William Frejlich
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