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ING DERIVATIVES CLEARING
209 South LaSalle, Chicago, Illinois
(August 22, 1997) CORN: UNCERTAINTY BREEDS SUPPORT–Since our last letter, the USDA tossed the market a curve with their estimated crop down 500 mln. bu. from most estimates. While prices backed off quickly, the real net effect was to put in the season lows under $2.30 last July. The report also needed to change our perception of prices: having looked at a 9.6 bln. crop the potential was a brief stint to new contract lows. The 9.27 bln. crop would keep $2.50 as a swing point of support. The upward pressure then comes from that report whenever there's uncertainty over weather. And there's plenty of that. Cool, damp conditions and forecasts for more of the same; that the cooler than normal temps could make for an early frost; that the recently past rains did little for the dry areas in IL/IN. Toss in a crop tour that is even below the USDA yields, and support is evident. Export business picked up a bit, but not a major supportive factor yet. Talk of further decreases in the China corn crop also remains a wild card. Under these circumstances, there's plenty of uncertainty and uncertainty breeds support. The odds seemed to have jumped to 50/50 for a pre-harvest pop. As before though, let the market prove itself and exit shorts when the July highs are taken out.
John W. Kleist
Sagamore Partners, Inc.
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