Excellent Article On Where US Economy & Asset Prices Are Heading

[rayfcom]

It a pretty well tried and tested rule that price movements that do not bring in new participants usually do not have the strength to last, and the price movement fizzles out giving way to a continuation in the previous trend. This kind of activity is often seen in what are known as short-covering rallies. If money is sitting on the sidelines, it means demand may be present but waiting for a better price opportunity before committing its capital, and the open interest numbers reflect that.

[rayfcom]

Well if you have a better system of determining the supply/demand dynamic globally for corn as it exists at any given movement and as it is expected to exist in the future without watching the commodity futures markets, then I say God bless you and keep up the good work.

I have not been so blessed and know of no better way to gauge these important factors in determining prices than to analyze the data from what I believe is the largest market for corn and most other agricultural commodities in the world, that being the Chicago futures exchanges.

[deasmatt90]

Fact is experienced traders have to have bag holders. Why does the market move up or down? There is no reason. All one can do in the market is buy at support sell at resistance and let the probabilities of the trades make money right? Or buy at resistance and gamble on the fact that charts only break resistance 10% of the time I've been told by an experienced trader?

[rayfcom]

I don't believe its an either/or proposition. I think you should carry on with business as usual except when the storm clouds are building and there is an exceptional risk of a turning point in the overall economy and in commodity prices. Such as what I and other analysts and portfolio managers are seeing on the horizon for the next year or two.

At those times you need additional weaponry to protect your business against catastrophic injury to your profitability and cash flow, and a good hedging strategy will do that. From a more active perspective, a well-tested hedging strategy can be an additional source of income that enhances your profitability. The important caveat there is not to make the mistake that General Electric made and allow the financial arm of your business to inadvertently become the core of your business.

If you can find a good hedging strategy that makes money consistently, adding it to your arsenal of profit centers makes sense. But never lose sight of the fact that you are a farming enterprise first and the hedging portion of your business should never be more than a small augment to that farming business. 

[rayfcom]

What you are asking me for is the Holy Grail of investment, and I'm sorry to say that I don't have all those answers. I don't think anyone does. And even if I had it or knew of someone who had it, I probably would be loathe to share that information with anyone, primarily because I would wind up being up to my ears in legal problems for most of my days and nights.

But what I do know from my nearly forty years of making a decent living in financial and commodity markets is that consistently good hedging strategies do exist from some very talented sources, and should be employed especially at critical turning points in the economy which can adversely affect the cash flows and prices you rely on to operate your business. And I think its prudent for any producers to identify those strategies and their advocates and to incorporate them into your overall business enterprise.

[deasmatt90]

I can tell you this. As a producer bad times have been in ag for the last three to four years. If this aint bad times yet and you say it's going to get worse, I can assure you it won't last long and no hedging will help. A lot of producers in the US has no need to hedge next year because they are in the process of harvesting their last crop. Thank the lord I'm not one of them as long as the good lord keeps me on this earth healthy. We are at break even prices and below break even prices for corn. We had one week at best to pull trigger on expected production for corn sales at a level for me was a profitable level with basis. Many weren't so lucky. Do u really think that production going into 2019-2020 will stay the same or increase? Why would one grow it when you can buy it in Chicago cheaper? I expect a mass producer exodus after this year from all publicly traded commodities.
We are one of few nations that aren't paying 80% of household income for food without current government interventions that would not be so.
My father always said that when the economy was booming in the urban areas the rural areas would suffer and vise versa. Well I think the urban economy has hit its peak.
Add this in, all sorts of resistance against a republican president that the swamp hates, don't you think that they are hiding in the usda as well? What better way to destroy his base than to hurt their livelihoods, everyone votes with their wallets! How do you hurt the lively hood of an ag producer? Prices! How can the resistance manipulate prices in the gov? Unrealistic usda reports! I'm very skeptical about this bumper crop usda keeps reporting!
I agree that the US economy is at its peak and is due for a slowdown, I just have a hard time believing ag commodities will fall with walstreet.
Remember 2008?
I have to ask, are you considered an institutional investor or work for an institution as defined by finra regulations? Just curious. If you are then I know you can't share the holy grail, not legally anyway

[nutlug]

You say a lot of farmers are harvesting their last crop and questioning if production will stay the same or increase 2019-2020.

It doesnt matter because there will be someone to farm those acres and they wil do their best to produce the maximum bushels from every acre.

Sometimes hedging a small loss is a good idea rather than leaving yourself open to a bigger loss. Take a small loss, burn equity, and stay in business another year. I am not advocating this as a strategy for the long term but sometimes you just have to survive until next year. (or longer)

https://www.msn.com/en-us/money/markets/struggling-us-farmers-have-a-new-worry-a-resurgent-russia/ar...

It is a world economy and if US producers cant compete then we will go out of business. Someone else will then pick up our assets at a price that allows them to compete.

[rayfcom]

You raise some very interesting points with some excellent conclusions. Indeed, what should happen in theory as prices fall for a commodity is that producers choose to spend their capital elsewhere, and over time, the reduction in supply of the commodity causes its price to start moving positively again. I think this will happen in corn, albeit over a longer time period that you suggest. The ultimate pain in price has not yet been reached according to the data that I look at which is why I am very wary about the counter-trend upmove that started late last week. Its well-documented and makes sense from a macro-economic standpoint that there is a correlation between overall economic activity and all other aspects of the consumer economy. Food products probably fare better than most other items like housing and furniture because people still need to eat. But the bottom line is that a contraction of wealth in the overall economy puts downward pressure on most commodities, and I don't think this time will be any different.

Don't get me started about the politics of America right now, its a disgrace. What's the sense of having a Constitution and laws if half the country don't want to follow them, and castigate a President who does ? Anyway...

To answer your last question, I work for myself investing my own money after spending most of my career working as an investment and data manager, mainly in the trading rooms of banks and large financial companies. 

[wrightcattle]

They have a decent market dip  there's lots of spin pressure put on farmers to sell, sell, sell.

and its spun also that soy will never have a decent sales price again.

funny thing is once the farmers have sold a lot of physical due to the afore scenario, then beans come back up to new highs Most times.

This time is truly no different.

say $11 beans by March 1st....we'll see.

[rayfcom]

I don't follow the bean market, but I know this : every time someone pulls out those old lapel buttons that say "Beans In The Teens", its usually a good time to sell.