OptionEye.....Dec. 28th

[ShelladyOptions]

While the floor is relatively quiet with many traders on vacation and others wrapping up the year, we have seen a nice rally the past few days in the grains.  Chatter around the markets points to weather concerns, but I also think that we have seen a bit of a technical rally coupled with a quiet market.  Speaking to one of the guys in the futures pit and looking at the charts I think we could see a rally to the 650 area, but the real tell all will come on the 12th when we see the numbers. 

Things to keep in mind:

1.  Slowing Chinese economic growth predictions

2.  A slowing global economy

3.  The European debt crisis

All of these things may sap demand for grains moving forward.

Scott

[Mizzou_Tiger]

"All of these things may sap demand for grains moving forward."

where does this line of thinking come from...........do numbers exist over history to show us yearly world consumption (either direct or indirect) of course grains and oilseeds...........and is their a proof positive lower trend in that consumption during these so called weaker economic times.........

I ask all this, because, well frankly you probably know I don't buy into all this demand just goes away garbage.............a couple of years ago we went thru one of the worst economic down turns in the US and it pulled down the world economies too..........yet demand didn't die, it increase............the reasons grains collapsed then was not demand, it was supply, and I have said it many time, 2008 was ALL AIR, corn should have never went past $5-$5.50ish.........

we are in a fundamentally different spot with supply and demand right now, especially if we continue to struggle with weather in multiple growing regions across the world.........

personally I think drops in grain prices is blamed on weak demand, but its really just our past ability to find more supply..........IMO that is no longer the case........

again I ask, is there firm data that shows world consumption is dropping..........I would argue very strongly that it is not dropping.........do people just stop eating.........do livestock go unfed........

death, taxes, food, fuel, shelter.........in that order.........

EDIT:  I might come off a little harsh, like 80 grit sand paper harsh............but I am tired of people using this demand could get weak thing as a crutch.........I wanna see some proof positive, yearly data for decades showing global consumption..........I try and lay out as much real data or evidence as I can to back an opinion..........but this demand will get soft thing is getting real old..........

[roarintiger1]

Things to keep in mind:

1. Production for US crops may have been overstated.

2. Demand for the US supply may have been understated.

3. South American drought is for real.

4. Iran/US problems may just increase the price and profitability of ethanol.

All of these thing could offer farmers some real good selling opportunities again in 2012.

Sorry, I just had to offer the other side of the story.  🙂

[Blacksandfarmer]

Scott unless you are a paranoid farmer selling into fear the market will crash with historically low inventory (I do know a couple)....... Grain farmers are in the drivers seat at least for a while in this market. The bin doors will stay locked up until we get these rallies, the farmer will need paid to take the risk in opening  up marginal CRP ground to add corn acres for next year. I doubt we get much for additional corn acres out of the Eastern cornbelt..... Not as much fall tillage done and we still have corn standing in a few fields.

[kraft-t]

I guess if someone advocates looking for sales opportunity, that means I am paranoid.. Not everyone can be a reckless speculator. Some need to be a responsible marketer. Locking the bin doors until prices rise but the get unlocked **bleep** quick when the panic occurs.

[Mizzou_Tiger]

Kraft....if you are happy with your sales and it pays the bills then you are doing fine.......also understand that being bullish doesn't mean sales are not made or that it's reckless speculation.........

[425Cat]

Ever since corn hit 7.50 plus , some of the big guns that write in the ag media have been saying that demand was destroyed and use USDA numbers to support their arguement. Was it really destroyed or just maybe no new demand came on line? And you can hear some whispers of Oh now that corn broke to 5.80 demand is saved and rebuilding. Doubt demand  changes that quick, whipsawing back and forth like that in a matter of a few months. Can't offline and online some of these industries that quick.

I am thinking if she rallies into the report it probably should be sold, however.

[idalivered]

I usually agree and appreciate your comments, but ....there is always a price point at which people  will use less. Use gasoline for an example, there will always be demand, but at say $4.50/gal. , people will use less. They will park their suv's and big pickups or just make less trips.
 At certain price levels, feedlots will look to any other alternatives including not filling pens. CompAnies and farmers will breed less sows after months of negative returns. I now raise almost no hogs, because the corn price makes it a very low margin enterprise even after hogs have gone up. (plus it's alot easier selling $6 corn) Poultry companies will set less eggs, etc. The future remedy is higher prices RECEIVED by the endusers, but that will come after a period of losses that will curb feed demand. Was it 2008 that some ethanol plants shut down for "maintenance"?  Demand is not inelastic. For both of us good corn demand fits in our bank accounts, but price can always trump demand. You've held firm these last 30 days in you assertion that corn has to go up. Good call, but it can't just go up forever.

[Mizzou_Tiger]

What you speak of is short term rationing.....not too much different than cat and mouse with exports......that rationing is dependant on the elastic or inelastic properties of demand......I would argue demand is pretty inelastic given we have gone from 2 corn to 6 plus yet yearly demand is flat or growing.......

So again I ask for a total world consumption chart showing a trend.....I would be willing to bet its upward trend on a yearly basis.....thus we are using more and more yet having a harder time finding more and more......that's why I believe we are in for a multiple decade bull cycle with nat resources/commodities becoming very important..

[Blacksandfarmer]

No Kraft you are not paranoid looking for sales opportunities. I am the opposite of a reckless speculator. I don't have bins so I forward sell grain when I think I can make some money. Nearly all inputs have been bought for next year so why not look to cover that cost with some rally selling? I made my fist sale in soybeans at $11.11 last week for nc 2012 delivery........ That is not speculating! I am waiting to lock in the remaining bushels of soybeans at a price around $12 and corn around $6. Im not positive but I think the market will hit those numbers for new crop before falling a bit. What I ment to say is that I don't think many farmers will panic and sell grain in large quantities with macro news like MF global and European dept crisis. The reality is we have low inventories of grain with slowing demand do to some rationing...... Until we rebuild stocks why sell at rock bottom prices.... That's all Im saying Kraft-t.