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ShelladyOptions
Senior Contributor

OptionEye..May 24th

Good morning.

 

Had some interesting chats with a few farmers that are actual daily users of the futures markets here in Chicago. As the subject of MF Global moved on to the 'tight' cash market we spoke about the agricultural economy and the wealth that has been created. We are all aware of land prices and how well the farm implement shops are doing. These farmers thought that the reason the cash market was tight was that the farmer was wealthier and had a much stronger hand than in the past. Something that I have coined 'Shock and AWE' with the shock being the volatility and swings in the market and the AWE being the Agricultural Wealth Effect. The effect of stronger hands in the market.

 

What do you guys think about the theory these farmers were talking to me about yesterday?

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4 Replies
Palouser
Senior Advisor

Re: OptionEye..May 24th

That argument makes little sense. First, what caused initial price rises to make farmers 'wealthy'? Obviously it was demand - and ethanol and China are solid candidates as we are producing record amounts of corn. If 'strong hands' were the reason for high prices then there must be a LOT of grain stored somewhere. Where? Even if not highly accurate those numbers should be showing up to buyers and the public at large. Yet we have record basis. 'Strong hands ' might be a factor at times but expensive land has to be paid for, as well as inputs. And yet there are corn deficit areas and plenty of stories of empty bins. To capitalize on current trends one must sell in the end. It can only be 'put off' so long. The strong hands theory indicates a glut of corn before harvest and falling prices if farmers are going to make room for the new crop.

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marketeye
Veteran Advisor

Re: OptionEye..May 24th

OptionEye,

 

I'm hearing talk of the CME Group being asked to open pit trading at 7:20 am, on crop report days. And, the request is asking for a daily pit closing at 2 pm. Supposedly, this new schedule is being asked to be in place before June 12 crop report. Are you hearing this same request? What do you know?

 

Thanks,

 

Mike

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kraft-t
Senior Advisor

Re: OptionEye..May 24th

I road that long and wrong wagon way too long. I came to the conclusion that some of those folks with slim prospect actually did a better job of marketing than I did. I always thought the market would go higher even  when there was evidence to the contrary. Some times tight hands fail to let go when they should It's a matter of mindset and being focus on finding sales opportunities. Especially if you need the cash for upcoming out goes.

 

No everybody can wait for the wrong decision to become right. I like cash in the bank better than grain in the bin. There is always another bushel on the way. I hardly remember the $8 beans that went to $14 for you wise guys afew years back.  But I haven't forgot those $14 beans I had a few weeks ago that I still own at $13. 

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Canuck_2
Senior Contributor

Re: OptionEye..May 24th

I will agree with Kraft.

the smart money sells when they can get a nice profit.

 

Those playing the 'AWE' game will not be able to wait out the next down turn because they missed the last up turn,........ waiting for?? just a little more.

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