02-23-2011 08:59 AM - edited 02-23-2011 09:00 AM
Some of the things that are going on in the world to me is nothing but bullish for anything that has an energy component....."IF" these middle east oil producers halt there oil production for any length of time..... We could see the old highs in crude oil taken out and new highs established....... I can tell you that the grain markets have not calculated 150+ oil into the mix...... Unprecedented times for sure........ .p-oed
02-23-2011 09:11 AM
it would throw the economy into a deeper recession and bring abount price controls and rationing. it would make the 1970's gas lines look small. Nothing bullish about that.
02-23-2011 11:01 AM
$140 oil would make 15% ethanol a no-brainer and might have to up to 20% , get an EPA waiver with be forthcoming if oil goes north of $150/barrel. I think a lot of senators and congressmen remember the gas lines in the 70's and they want to keep their jobs. The credit could be reduced now, this break will produce a great buying opportunity for end users. I expect the break to last another 60 - 70 cents.
02-23-2011 11:57 AM
I agree buck. Turmoil in the Middle East is nothing but bearish long term. In the short term, it might provide a spark to grains. However, it will be met with huge consequences. Why is the Middle East uprising? It's because of high unemployment and out of control inflation on food. For the most part, most countries believe food prices are spiraling out of control for one of three reasons. Some think it's because of the U.S. Fed policy devaluing our currency. Some believe it is out of control speculation. Some believe it is the U.S. ethanol policy. Whether it's a combination or just one of the three, the finger gets pointed in just one direction: directly at the U.S. Here's what we do know. The House just defunded E15. Grassley who's bee the biggest supporter of etoh stated that blenders credits and tariffs face an uphill battle. The foundation of the etoh foundation seems to be cracking in different directions. I wouldn't lose a lot of sleep about gas lines like there was in the 70's for two reasons. Gasoline prices are already at the breaking point. It's of no coincidence that the U.S. has the highest supply of gasoline in over a decade. We were rationing demand before oil climbed nearly 20% in a few days. Second, there's no side in the Middle East stupid enough to destroy the only thing they have going for them: oil. Even amidst all the uprising and riots in Egypt, the Suez Canal never missed a beat. With oil prices rising significantly, it becomes a lot easier for the ones who come out on top as leaders of those countries.
I've often times wondered whether or not Bernanke has the balls to implement Q3. It's becoming quite apparent that we'll soon find out. We'll find out whether Congress can reel him in, or whether he'll cowboy off on his own. Yesterday, I found it quite amusing reading the cold storage reports for poultry, pork, and beef. Everyone has a breaking point, and it appears as though we're finding them. Reading the housing reports confirms the same things. Home prices have fallen to 2002 price levels, and it's predicted that 2011 will be the highest home foreclosure in history. Homes have now fallen below levels where we were before the home buying credit. The stimulus thrown in that direction did little more than just delay the inevitable. With energy prices running, it's sure to deal the auto industry another huge blow. I have a feeling that nearly everywhere direction stimulus money flowed will eventually follow the same path as home prices. It kind of reminds me about the two old boys who bought a truck together. They were losing their shirts on the truck, so they decided to buy another one.
02-23-2011 01:20 PM
UNL I keep hearing about his break but as an enduser I just am not seeing it. THis move as a percentage is just like a 10 cent move from 2.50 to 2.40 Really just ho hum! I sure wish you guys would think of something just a little different then here comes the bull! You guys can get your shorts in a bind real fast if you have 150 dollar oil. It will break you guys! Cause the fuel sur charges on every thing you need will be huge!
I hope it doesn't happen to you but I am thinking the gig might be up soon.
02-23-2011 01:45 PM
I really believed that we would see fund selling for a 3 day stint, don't know if they are just resting to do a fake out or if it just is that bullish. I would have preferred to see another 60-70 cent drop to let an end-user get some more coverage. Obviously, that will have to happen another day. Volatility is increasing, signs that a top is getting closer. If I knew exactly when, well, I would own an island or two. So would you.
02-23-2011 02:20 PM
Unglad..... That is the problem..... A lot of people wanted a bigger sell off .......Thats why it has not happen yet...... It will be interesting
to see if this holds or not...... If not.... You will get your chance to buy lower....... Lower prices with this much of the marketing year left IMO just cant happen for an extended length of time.......We still need to slow demand............ If this were july......I would have a different view......Most people by then will know as to what there needs are going to be and the dye will have been cast......p-oed
02-23-2011 02:30 PM
JR..... You are most likely right about high priced oil...... The only problem is..... We have no control over it..... It will go where it wants to go and we will have to live with it..... I would have loved to have had the market place last spring offer us corn farmers a price that would have provided 1 2 maybe 3 mil more acres planted an we would not have this 7.00 problem today...... I hate the fact that there is going to be end users go out of business because of the high grain prices...... But like oil prices...... We have no control over it.... We just will have to live with it......p-oed
02-23-2011 02:36 PM
I don't see the bearish implications you do. If the Middle East wants the amounts of wheat they need they come to us this year. I don't see a good option for them at this point. Price of oil up? The ethanol is more cost effective, assuming use doesn't go down too much. That is a moving target, so will see. The usage of oil for transportation will go down and continue down in the future, regardless. That's structural. Oil producers know this. China is taking up some of the slack, but they will become efficient too - long term. This is their big opportunity to make money, but they cannot afford to kill the goose. Exactly why the Saudis said they will pump more.
The Middle East will simply not back off wheat purchases. Doesn't gurantee prices, but they will buy in any case.