John Macintosh: Play it Again, Sam
Comment of the Day

November 08 2011

Commentary by David Fuller

John Macintosh: Play it Again, Sam

My thanks to this renowned analyst / trader for his latest assessment of the US corn crop. Here is the opening:
Here we go again. Another USDA crop report coming on Wednesday. Once more, another photo finish between all the grain analysts on the corn yield; all clustered around the USDA's October yield of 148.1 bushels per acre. With all the velcro, duct
tape and crazy glue with which the analysts attach themselves to the USDA it is really hard to tell them apart. Once again, just like last year, I disagree strongly with the consensus. And if I am wrong it is not for lack of trying. My colleagues and I have
spent several hundred hours since early September amassing many thousands of yield reports. I suspect that we have spent more time on yields than all the other analysts combined. So, besides the amount of homework done, why do we disagree so much? The answer I believe lies in the phrase "Better Than Expected". At the start of harvest this buzz phrase was uttered, picked up and repeated so often it became part of the vernacular. Let me give an example of "Better Than Expected". A construction worker slips and falls five stories, his fall is broken several times as he bounces off steel girders on the way down. With every bone in his body broken and multiple organs ruptured, he remains in a coma for three years. Yet he survives, he did....."Better Than Expected". But he is a far cry from his former self. The same is true of the corn crop. The 2011 corn crop got hammered from many directions.

David Fuller's view Last year, as I recall, corn (weekly & daily) fell sharply for a couple of weeks following the USDA's November report, before surging into the new year as their yield forecast proved to be way too optimistic. John Macintosh thinks the USDA may understate the damage in tomorrow's report. If so, and if most traders are influenced by their assessment, corn may fall back once again. That would provide an opportunity to buy lower, for those of us who sometimes trade grains.

I am looking for a re-entry point but decided to hold off for at least another day to see how the market responds to the USDA's comments. Meanwhile, this rather bullish summary from Bloomberg may have contributed to today's somewhat firmer action. I would rather buy corn on a pullback but would most likely follow a clear upside breakout, if that is what occurs.

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