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12-13-2012 02:57 PM
First, soy. I predicted that the recent drop in grains would trigger Chinese and other buying. It did. I think there is still some believers that China can cut back in purchasing commodities or delay. Their behavior shows that it can't/won't. They will speed up buying given the opportunity. There's a distinction there.
China continues to ramp up buying of soy on an annual basis. There is every reason to believe that behavior will continue due to their priorities and hog herd locations. Growth of meat products is their agenda. Logistically they need to have soy landing at various ports EVERY DAY! I believe this to be an absolute requirement. The logistics of unloading nearly 60 MILLION metric tons of soy each year is an awesome project. For those who thinkl China's economy is a determiner of these things (I'm not) it appears China's economy is going to be growing @ 10% again.
Never have I and the futures market been as divergent as it seems now. Wheat has me completely spellbound! Though naturally long as an opportunist/pirate producer/marketer I NEVER speculate using paper. NEVER. But I'm ready for any sales opportunity based on my assumptions of the market. I am sorely tempted to double down as never before but, it has been an ironclad rule for myself that I won't do that. I have been and will be rewarded through patience. I have to remind myself that it would be hard for me to do better than I've done.
Physical wheat for this marketing year is STILL deteriorating and despite 'assurances' that next year's wheat will be 'better' it is small comfort to those who need to buy before those stocks are available. So, how does one explain current futures price trend? I'm open for suggestions on this. I believe futures are lagging indicators of physical but, the current trend goes beyond that IMO. It's contrary. I felt the same way just before the 2007-8 marketing year explosion - and i attributed it to an unwarranted and unwise comfort level in futures despite the physical trends clearly indicating the opposite.
So, how does this resolve? I think the first indications will be buyers quickly placing orders for US wheat (as has taken place w/ soy). I'd predict 'snap' tenders or numerous tenders for future delivery by Egypt. Followed by numerous other importers. In other words, in the next few weeks we'll see a resurgence in orders. Ideally this would trigger rises in prices that would cause importers trying to make up their minds to shop elsewhere and finding that fewer exporters are going to let wheat go at 'cheap prices'. This would trigger 'insurance' buying that would keep prices going. I don't see a market 'explosion'. I see the lieklihood of continuing stronger prices.m Unless the Plains start getting solid percip the poor prospects will remind some that 'it could be worse'. The predictions I've seen lately are for La Nina patterns that aren't favorble for the southern Plains and stands in poor condition.
Enough for scenarios. Just have to sit back and watch. And learn.
PS - It appears the Argentinian government is so concerned about their poor wheat crop they are delaying ships already loaded for export.
12-13-2012 04:44 PM
Fundamentals are there , Fund buyers are somewhat absent.
I think if this goofy fiscal cliff thing was solved it would take away some uncertainty and the funds would go after this thing with both barrels. Plus year end stuff.
One would have thought beans would have closed .30 up today after the strong exports . Should get a strong crush also.
We need the funds
12-15-2012 01:45 PM
If you bought the iead that next year's crop is "better", you have been snookered.
Obviously after a bad crop the world around, next yr's is odds on likely to be better.
ODDs , yes very likely but no sure thing.
High prices = higher investment the world around- WATCH aussie and oher asian WW plantings this prring,,,,huge new record.