How high can we go in the Soybean Market?

[Palouser]

I think if you want to make your case you need to choose another year other than 2003-4 for your argument. Without looking at the preceding years, the 3 years following that had lower carry outs. And that year did have price increases.

I'll also point out, because it matters, that wheat was the leader in 2007-8 (besides the other factors I already pointed out that were NOT present on 2003-4).

Want to make your case? Look for a year in which pretty much all else stayed the same and there was an unexplained explosion in prices. Then I'd entertain the idea that speculation can cause price rises that are not fundamentally caused. Speculation WILL pile on. But it isn't the cause. Fundamental physical shifts are always present and the market reacts in those ways, not counter to. I'm arguing cause, I think you are arguing effect.

[GoredHusker]

Let's look at the petroleum products.  We topped out in July of 2008 in terms of price.  Looking at the charts, petroleum ending stocks were higher in 2008 than at any time from 1994 through 2004.  It should be noted that the January Crude Oil contract made an all time low in 1999 at $10.35 a barrel.  The ending stocks in 2008 was well higher than at anytime in 1999 or 1998, yet there was a $140+ difference in cost per barrel.  The lowest ending stocks since 1990 occurred in 2001/2002.  Crude oil was priced in the $20's.     

To illustrate a case for unexplained explosion in prices, we have to look at two charts.  The first chart is the weekly crude oil continuation chart.  The second chart is the weekly petroleum ending stocks.  From 2003 to 2005/06, both charts were going up rather steep.  We were building significant supplies of carryover petroluem stocks at the same time petroleum prices were going up significantly.  Prices went from $26 to $70 while supply went from 1.483 million to 1.778 million.   

[Palouser]

In order to have proper context you also have to include global consumption. The period you are talking about is also during the time the potential of China and others displayed for growth.

I don't believe the price has a linear relationship with inventories, production and consumption. And closely related commodities are an influence, as are political events - such as war. Insecurity is part of it, and related speculation too.

I'll go back to my main point. I don't believe speculation causes bubbles. I see no evidence of that. Speculation goes along for the ride. Flies don't cause cow pies, they are just attracted to them.