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(September 26, 1997) CORN: CORN BELOW 260–The market has challenged the down trend line and failed. This is triggering funds to begin selling a huge long position. The economic outlook projects a sell off towards the 220/230 area and odds are pretty high that there will be more weakness before the harvest low is in. Although harvesting is still in the beginning stages, today we received calls from six states harvesting and all were running above expectations. We are short 100% at 289. If you are not short, sell March futures or buy 270 puts and sell 280 calls. The cost of the options is only about $350 and locks you in at 263 or 283. If futures fall to 240, then you could make about $1500. If it moves to 230 as the chart is starting to suggest, then you could make almost $2000. Not bad for one contract! Once the market hits those levels, we will get out as the loan protects the downside. Many producers are starting to sell but most are still bullish. Most producers have the plan of using the loan and waiting for a higher price. The problem with that is if the market does move lower, you do not get the deficiency payment. So if you are wrong, and the market does not rally to 300 this spring (remember we will have more acres next year) you will be stuck at the mercy of the end user with no price protection. Thus the options are a good alternative if you do not want to sell. As for trading, there is a gap at 256/253 that should attract the market like a magnet. Sell rallies and risk 4 cents.
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