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09-19-2013 08:00 AM
We still have substantial obstacles in Washington coming our direction the next few months, this might make it difficult for the S&P 500 to continue pushing to NEW highs each week. I am not calling for a major tumble, but I could see a sideways to slightly lower channel until we get past these hurdles. Below are a few additional items that we have been monitoring.
- Washington seems to be getting closer and closer to a potential shutdown as the debt ceiling debate heats up. (Bad News)
- Fed Chair replacement Larry Summers is removed form the equation. Market digesting it as "Good News" since Janet Yellen is much more accommodative towards easing monetary policy.
- Syrian peace talks have temporarily eased some concerns. (Good News)
- German polls showing Chancellor Merkel in strong position. (Good News)
- Berlusconi looks to be backing away from talks of bringing down the Italian government. (Good News)
- China is closed for a National Holiday the next two days so not a lot on the radar screen. (No News). Japan is fairly quiet as well with the yen continuing to show mild strength vs. the US dollar. A trend I don't see continuing.
US dollar has now fallen back to levels not seen since late-2012 or early-2013, the problem is the Ag markets are not responding as aggressively as some would have anticipated. The fact is more traditional type fundamentals are back to driving market direction. Point was made crystal clear yesterday, when gold jumped over $50 per ounce and crude oil jumped by more than $3.00 per barrel following the Fed announcement. Corn, beans and wheat however had little to no reaction. Meaning there is more of a disconnect starting to develop with the "outside markets."
We now need to be careful thinking money flowing into or out of the metals and energy markets will have a major impact on the grain, soy or livestock trades moving forward. Remember, many global banks are starting to throw in the towel on speculation involving a "food" type commodity.
Solved! Go to Solution.
09-19-2013 08:27 AM
""We still have substantial obstacles in Washington coming our direction the next few months, this might make it difficult for the S&P 500 to continue pushing to NEW highs each week. I am not calling for a major tumble, but I could see a sideways to slightly lower channel until we get past these hurdles. Below are a few additional items that we have been monitoring.""
I don't mean to be the constant critic but I really don't think someone claiming to be an Ag analyst can be a stk mkt, crude, metals guy. If you were just a poster with view to share that is one thing, but you have some advisory you well?
The above statement implies the writer doesn't even own equities. Equities have things to worry about all the time bull mkts and bear. We are in a bull mkt, if Syria, govt shut down, or fiscal cliff were worries the mkt would not be making new all time highs. It is “easy” to say, sideway to down due, but useless. Of course at any time a bull can correct or yturn into a bear, we live with that. Successful investors buy value in good companies and own them. People who hve the above worries sold 2 6 or 14 yrs ago. “global banks are no longer into food” is baloney. Global banks don’t own food commodities, some have become commodity advisors in recent yrs with the bull mkts vs the 08-09 equity bear. Big deal, they spout opinions but have no market influence. If anything, some pro specs use their pronouncement as a fade variable.
“ the funds did it or Goldman did it” is pure cop out, easy to blame vs actually knowing something.
In the end commodities are all supply/demand fundamentals. Along the way excess speculation can have sway. Trends, read Soros on Soros, vs seeking equilibrium econ 301, mkts tend to run in trends following the primary fundamental theme, self reinforcing until they just can’t go’ no’ mo, and reverse.
Last, $$ leaving food to go to crude or silver? Really? Have you noticed if anything commodes have been more correlated than not.
Tell me how $$$ leaves the stock market, to go somewhere, please explain how $$$
Can come out, therein will prove your mettle or not.
09-19-2013 09:08 AM
I agree that the bloom is off the rose as far as net money flows into commodity investments. That probably includes gold and silver as well- worth noting that yesterday's shot higher took both back to where they were 6 days ago. Probably some more upside off of momentum but a long ways to go before you can declare the downtrend over.
I don't know what to make of oil, which doesn't mean the market is wrong, I'm just not getting it. Loss of Libyan production probably more than anything else (where's Gaddafy when you need him?).
On grains, I can't quantify how much the sentiment on the upside of the cycle contributed to prices relative to known fudamantals but it was substantial.
Also think that the fact the the ethanol mandate has been mostly acheived is no small thing- before then it was well known that the goalposts would get moved every year. That was true last year and you could feel it in price action but the drought intervened.
09-19-2013 11:40 AM
good observations. A theme to reflect on, when crazed index funds loaded up, excess long speculation, it was giant and had a big effect, normal short siders got blistered and everything added to the excess. Good producers earned by harvesting crops of CN soccer Moms, cool.
Now, if we are going to completely unwind that, would we over do on the down side s well, so many producers seems to think we are/were in a new paradigm > there is no such thing.
You can feel it here, missing the 7 8 $ corn, the last 2 yrs it paid to wait, that imprint is in most producers minds, LOCK THE BINS.
I read all of that as bearish, production is undersold, the market awaits . The enmass psyche backdrop creates its own setup.
If we could see 4.25, might we see 3.75 instead?
09-19-2013 11:53 AM
And what farmer is going to sell at less than the cost of production in this day and age? When we have the bin capacity to store it away and wait for better prices. Is seed corn going to come back down to $100. a bag? How about fertilizer that a lot of the coops have already bought for next year. Think we can get potash back to $110.00. Chemicals, equipment, land - are all these items going to come down in the next 3 months to make your dream world of $3.50 corn come true? Farmers are connected, and I for one am tired of the games to get crops out of prducers hands. You get all these entities to drop thier prices first, then we can talk about how cheap next years corn can be.
09-19-2013 12:17 PM
How long can you wait to pay your bills? I am not in the position to tell my banker to hold off a year I am trying to out wait the markets. I will have to sell eventually to cover living expenses also.
09-19-2013 12:24 PM
Every farmer needs to make that decision for themselves as to what needs to be sold. I've used short term marketing loans (9 months) through first the FSA and then later I simply opened a second account at my bank that I used as a market loan. It was a line of credit secured by the binned crop. That worked really well for me, and was easier to use than the FSA, and just a little bit more interest. So, yes, I had to take out of the marketing loan to pay the bank. But it gave me the time I needed to market my crop effectively, without being forced to sell it to pay the bills.
09-19-2013 01:54 PM
We might see $3.75 cash price, but not futures. I think the $4-$4.25 area holds the corn market. We are already trading a 13.8 billion crop. I'm sure that will catch the crop. I see futures going back to $5 next year,,,maybe $5.50 -$6.00 the next year. Why the up tick for 2015, since it will do it. We need hay acres, we'll get them.. Right now small squares in my area re selling for $6.50-$7.00 a bale,, I hear some as high as $10.00/bale that's better then $4.50 corn. In my area anyway. ThecheapercornthisnextyearwillforcetheSouthAmericanandBlackSearegiontoreevaluatetheirexpansiononcornacres. Nottomentionwehavechickenexpansion, hogsareclosetobeinginaexpansionandthecattleindustrywillprobablystopgoingbackwards.
Function of price is to regulate supply and demand, it has done that with corn.
Price of corn has 3 legs in my view, supply/demand, value of currency (US and importers), outside money,
supply/demand: a lot goes into this, world wide weather, eating habits of consumers,
Value of currency: is out of the markets hands for the most part, It depends a lot on Fed policy, which I think might change soon,
outside money: this is the wild card, money flows to profit, profit flows like water, water finds the path of least resistance. Where ever someone can make a buck that is where the money goes.
My advice if you see a profit and is happy with it,,,take it!!!!!!!!!!!
09-19-2013 03:01 PM
Or, it could be that they just want you/us to think that, to further contribute to their profits as they jump back in before your information sources indicate they have done so. That's how big money works.