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c-x-1
Veteran Advisor

Re: There is limited time ...

thanks again for that fundamental perspective, Palouser.

  perhaps this is WHY mkts do eventually explode: the establishment's role is staying w/in confines of the herd (status quo) until critical mass FORces ortherwise.

c-x-1

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marketeye
Veteran Advisor

Re: There is limited time ...

Palouser,

 

Despite the Black Sea region problems being known for awhile, it appears (as you suggest) the markets haven't traded it, fully, yet. So, does that mean there is still time to get in at the market-bottom of this news and ride the European drought event upward? I wonder if the market has been too busy trading the U.S. drought then the macro markets then the U.S. harvest, followed by the South America crop-weather and that continent's planting?

 

Maybe the Black Sea region scenario is like the supporting actor just waiting for its 'line' in the play. And just like the actor, it is standing just slightly off-stage waiting for its cue?

 

Mike

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Hobbyfarmer
Honored Advisor

Re: There is limited time ...

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Here is a picture of a 500ish foot long "free range" chicken laying house going up today less than 2 miles from my house.  Demand destruction anybody?

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Palouser
Senior Advisor

Re: There is limited time ...

The futures market's outlook on the timeline is too short and too technical to make strategic decisions. A commodities fund may operate by the quarter by rebalancing or some other redistribution, depending on what kinds of assets are in the fund, and particiapants lower risk and yet particiapate in a longer term tend they expect. In amny case I don't see the larger funds having a deciding impact over time.

 

This calls into question the behavior of buyers. As far as i can tell they are exposed to the risk of market price variation, would not buy options, due to expense, and are similary operating on leveraged money positions that increase costs if there's much fluctuation (and I'd be happy if someone could educate me on buyer behavior in a situation like this). 

 

In the end, given the possible scenarios that would most closely apply to this situation (2007-8 is my reference though I think this time around it will be more broadbased than just wheat) then buyers ultimately have to source the physical product and futures don't always help in that regard. Since producers are effectively prevented from delivering physical they can't directly help those with foreight using futures contracts (and the CME doesn't want that to be a real possibility anyway from a logistical POV). 

 

It is a truly herd behavior problem. The herd can see predators around them but as long as the expected random animal on the fringes is taken periodically in the expected way through carelessness or cunning it's OK. But, when large groups of predators collect and start slashing through, and repeat their behavior even though they've recently eaten, then anxiety quickly reaches the panic level. Then the action starts and the herd stampedes, triggering more action. And maybe alerting other predators. 

 

As long as everyone stays calm the mathematics doesn't matter. As soon as the action starts the math becomes a dominant factor in motivating behavior.

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c-x-1
Veteran Advisor

Re: There is limited time ...

Palouser, are U talking end user (buyer) behavior or specs? aren't physical buyers at mercy of sources and logistics?

 

 

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sw363535
Honored Advisor

Re: There is limited time ...

Hobby,   --------------  FREE Range-------(it's election day---kind of like a day off----ok mike?)  ------ free range-----Hobby you don't have the best tag on here,  Farsider does-------------free range gives me an instant picture of farmers and ranchers chasing chickens on the open prairie, like that commercial of the guys herding cats.------------- Why do they need a house???  Free range---isn't that like open range

 

Isn't it amazing how we redefine things just to please the warped vision of the shopper and their analyst?  And Government employees will repeat, say, believe, and enforce anything if it maintains job future.  So be it.   Keep those federally funded free range egg environmental impact studies on the potential good of legislation banning steroid use in the egg laying population ----take a few years -----keep them going.          Am I guaranteed a spot of dirt or manure on the open range eggs------------think how massive the underground gathering, sorting, and packaging machines are going to be.  Wait,,,,,,,,,, Iowa has another XXXX advantage----------They already have the tile in place.

 

------------------------------------------------------------------

Breath taken------- asthma meds kicking in.

 

Palouser,

 

I always read your bring em back to earth comments with anticipation.  But I struggle with the idea that the markets are lagging indicators.  Lagging to production? usage?  Cash market in grains are (because of hedging activity) tied to the futures to the point of only "spot" seperation.  hedging and spec are nearly inseperable philosophy except for the stuborn streak of the hedgers crede.

Where are futures if there isn't the anticipation of the future?  Aren't we now looking at the lull created by anticipation of the upcoming normal or above SA crop?  As that is truely threatened, the market will reflect the anticipation of the short supply that will follow the poor SA crop.  Was the price runnup in Summer a reflection of 2011 and the effect of the drought of 2012 will be seen in the market next spring?  I don't think so.  IMO Markets are the constant adjustment to the now.  Drasticly limited supply may create a lower number of buyers and bids as the buyer adjusts to the reality of now.  If the buyer overadjusts or cuts back expecting no supply, price may go down for the bushels in hiding til the next bidder steps in. 

Very dynamic---------------------scrap that -------- its a big picture.

 

My waistline indicates that for several months(or years) I could modify my intake.  With our ever decreasing "third world", My guess is that the world could "suck it in" for several years also.  Grain is not as absolute a demand for food as is sometimes projected.  Demand won't stop---------but it can shrink for a while.

 
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Palouser
Senior Advisor

Re: There is limited time ...

Good questions as always. By 'lagging' in this case  I mean that prices can indicate grain is valued at 'x' and the assumption is that 'we'll get through this year just swell, thank you', even if prices are high in a relative sense. What we may find out is that we can't stretch the supplies as far as we though due to less rationing than anticipated, and deteriorating trends for production. Leading to a huge spike in prices later, which is what I anticipate. 

 

I certainly could be wrong but I've seen this before and called it before. I'm fairly confident I'm seeing it again. The trends won't change much in my opinion in terms of supply and demand. And we have a growing supply issue. If I'm wrong I'll certainly be so in public. If I'm NOT then I'm defining a situation where I can see the crossing of the important trend lines and the market is not 'pricing it in'. The proof beyond all doubt will be parabolic curves ahead. I'm assuming Dec or Jan. Could be later but I'm going by 2007-8.  In any case this would show a lack of anticipation by the market NOW in terms of useful market signals. That's what i define as 'lagging indicator'. By the time it happens it's too late to alter the trends and ration. Parabolic is the result.

 

One last before i take off. Food is as inelastic a demand as there is in economic models. Going hungry while the market goes parabolic means governments falling and riots in the streets. Governments will try and soften the blow but poor countries can't always do this easily. Corn/cane use for fuel can be modulated - but by then it's really already too late to avoid consequences.

 

Believe me, I hope I'm as wrong as Chicken Little. Exporting countries supplies are declining and only a few importing countries have a plan B in reserves - mainly India and China (which just raised it's subsidies for wheat again).

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sw363535
Honored Advisor

Re: There is limited time ...

Thanks as always Palouser,

 

I have forced myself to stop studying charts through this "unusual" circumstance (money printing/ historic droughts). but I find the head & nearly shoulders of the last couple months hard to ignore.  It has me bothered a little.

 

On Historic Events, I see your laging market point.  Maybe a "believe it when I see it" market response when events that affect world supplies happen.

 

Any how thanks for taking the serious part of my comment seriously.

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c-x-1
Veteran Advisor

Re: There is limited time ...

sw, you sure have been giddy like today!

but seriously, which one looks like a head & nearly shoulders to you? i haven't seen that one. i'm taking a poll on the concept of perception. thx.

c-x-1

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sw363535
Honored Advisor

Re: There is limited time ...

cx1,

Corn ------------not exactly head & shoulders, but a lot of resistance to blow back through on the way up.  

For the most part the amazing fundamentals are still able to ignore resistance and probably charting is out the window for a while.

 

But it will return.

 

cx ------ The lungs are clearer than they been for a while & I just felt good today.  Sorry if it was undignified.  We were headed for an election b s day.   I should control it,  hard to expect credibility clowning around.

 

 

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