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Re: Floor Talk January 13, 2021 (Report Day)

SW - I get your point too that spec can exaggerate rather than dampen market swings. The market is what gives us futures, and traders are all about *expected* moves in the future. If it is expected to be drier or political problems in the future, that raises risk for consumers, which in turn raises the value of having supply locked in, which raises future prices, and also sends a price signal to producers that the market wants more of that product in the future. But there is nothing to prevent people who never intend to own a bushel from buying and selling, since it is an open, global market. But when everyone thinks there is going to be ample supply sells short, then there IS a supply problem, not only do consumers bid up perceived limited future supply, traders rush to the exits to close their short positions, which further drives up prices, until the market is neutral or net long.

As producers, it is essential to at least try to understand the psychology of the market. Understand that the USDA will *never* correct a forecast error in one report, but try to smooth it out over several reports. Understand how greed and fear play into buying and selling decisions. Understand how net long or short positions in the market are likely to influence future prices if things don't go as expected. Understand that emotions in selling are more risky than having a plan and sticking to it as long as your underlying assumptions haven't changed. We may not like the markets at times, and we certainly can't control them, but we can make better decisions if we at least understand how and why they work.

 

Honored Advisor

Re: Floor Talk January 13, 2021 (Report Day)

Very true as long as we understand that two of the players in this game have unlimited funds or power to take out everyone depending on the market for a living.  And they go hand in hand into every monthly deal of the cards.

I am not pretending to know any inside secrets.  I am just saying I was much more confident in this trend and its causes before the speed boats jumped on the lake.  Chances are we will never know what turned this market for a while.... now we just start searching for a trading range...... because hot air is going to be the prominant force and the rediculous new crop "inflation" pump is running in the background now that february approaches and usda tries to make us think about something different to forget how far off they were just a few days ago. 

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