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Senior Contributor

Re: Is The Party In The Corn Market Over ?

I don't follow beans so I have no comment. But I will add that I expected cash to move up faster than the futures in all of the commodities affected by the tariff battle between the US and China, as importers in China sought to front-load their 2018 purchases prior to the full implementation of the tariffs and also prior to any additional escalation in the tariff battle that would cause tariff rates to rise further. This front loading of purchases will come back to bite the markets affected right in the hind quarters during the next several months, as demand that would have appeared in those months will be absent, already having been spent earlier in the year. 

 

I do follow the CRB Index, which has risen vertically for the last two weeks, and I can say from a long experience of watching that index that whenever you see a vertical move higher, it comes down the same way as it went up.

 

The four most dangerous words in trading markets are "this time its different". As I have pointed out in the corn market, there are very tell-tale signs that the last two weeks has been a short-cover rally, and not the start of a lasting trend. This could change, of course, but until Volume and Open Interest numbers start showing broader market participation, the fuel needed to sustain a lasting rally is not present.

 

That's how I see it.

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Frequent Contributor

Re: Is The Party In The Corn Market Over ?

Appreciate you sharing your reasoning.

Thanks

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Senior Contributor

Re: Is The Party In The Corn Market Over ?

Ur welcome. Hope it is helpful to your work.

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Frequent Contributor

Re: Is The Party In The Corn Market Over ?

You know out here in the boon docks where we have dirt and grease under our finger nails and corn chafe in our hair. I wonder how we ever got to where we let the CBOT set our grain prices. The traders/funds control the market with all their graphs and trend lines. If the market is going down it will continue to go down till it hits the last low or go up till it hits the last high.  Unless there is a break out.  

This is like trying to drive your car by looking in the rear view mirror. It only works on roads with out curves or bumps and as long as nothing pops up. The rest of the time you wind up in the ditch, over the cliff or pilled up on the guy that stopped.

I think we should turn the CBOT over to Las Vegus if you just want to gamble go gamble stop messing with our pricing.

Funds and traders that are selling commodities they don't have to other traders and Funds that don't want and can't use them. Solely for the profits they can generate by price moves. They have no concern about real value of any commodity only on how much they can get the price to shift. 

My rant for the day.

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Senior Contributor

Re: Is The Party In The Corn Market Over ?

The place for the blame is also shared by your farm coops who are supposed to be working on your behalf to secure the best possible prices for the crops you grow., But more often than not, these coops are nothing more than clerks processing orders instead of real traders who take advantage of price moves that benefit the farmers. 

 

What's been going on the last two weeks is a prime example. Corn prices rallied 25 cents in two weeks, but did so with shrinking interest of market participants. Knowing that there is a substantial crop out in the field that will need to be placed during the next several months, the coops should have been active sellers at these prices to lock in what may be the best prices they will see for this harvest. But that didn't happen, both volume and open interest readings have been shrinking during the upmove. If you wind up selling at below the $3.50 to $3.60 price that could have easily been received during the past week or two, those coops should wind up writing you a check for not looking out for your interests.

 

Additionally, as I have written about frequently in this forum, you need a partner in your enterprise who has a proven track record in calling price moves and creating hedges for producers. Bringing this kind of adviser into your work allows you to circumvent the incompetence of your coop in securing you favorable prices. You decide how much of your production you want to sell in advance, and your hedging adviser tells you when the conditions are best to set those hedges. Read other posts I have written in this forum to learn more about how a good hedging program insulates you from the market ups and downs caused by the hedge funds and independent traders, and increases your profitability and cash flow.

 

You really would not want to go back to the ways of moving your farm products to the way it was before a centralized exchange. Remember also that if you didn't have the funds and independent traders in the marketplace every trading day, you would run into seasonal periods when everyone will be trying to sell at the same time and you'll overwhelm end user demand. Having the liquidity of market participants other than producers and end users saves you a lot of money when harvest time comes round.

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