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Advisor

Panic selling

Most are flush with full bellies.  Say SA gets a good soaker and China cancels an order or 2.  The market goes limit down.  Will the bulls sitting on a pile of grain try to grab good prices while they still can, putting the market into a tailspin?

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8 Replies
Veteran Advisor

Re: Panic selling

Will the bulls sitting on a pile of grain try to grab good prices while they still can, putting the market into a tailspin?

 

From my experience they will not sell at good prices they will wait for the bottom and then continue to hold waiting for the next big rally.  That will fail to materialize and the almighty banker will pull the trigger for them at which point all the grains will go lower!  Or maybe it will never go down again who knows.

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Advisor

Re: Panic selling

I would rather be selling when prices are going up a dime a day than selling when dropping 60 cents a day.

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Senior Advisor

Re: Panic selling

I've had that experience. I sold beans when they were down the daily trading limit of 45 cents and the elevator took another 45 cent protection. Yes I bailed off the roller coaster on it's way down. A bad sale only in view of the price the day before. It proved to be a decision well made as the market did not reverse itself.

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Senior Contributor

Re: Panic selling

I think your scenario is a popular one, especially by those who've already sold, but it doesn't make a lot of sense as a serious prediction. I don't see physical grain triggering a panic. That leaves specs.

 

First, most of the grain in most areas of the country is already sold. Demand is good. The grain left is probably in strong hands and much of it is probably 'ace in the hole' lots - that is, not great amounts.

 

In my market, selling to the Pacific Rim, IF there was a sell off I'd hold tight because I know physical demand is there and supply is on the thin side and expensive to get into position.

 

I think it's time to admit these are strong markets for the forseeable future this winter. The S Hemisphere can only hold the status quo at best - and it can't flood the market, no way, no how. Corn and beans are going to holsd center stage next year until a fantastic crop is pretty well in hand. Any less than that and there will be volatile markets.

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Advisor

Re: Panic selling

Pal no offense to your line of thinking but I've rode the market down more times than I care to admit.  The laws of supply and demand don't always work in conjunction with each other.  Witness oil now.  Record supplies and highest prices since 08.  The traders don't care if they are trading beans or watermelons.  They're in in to make money period.  The trend is your friend.

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Senior Contributor

Re: Panic selling

If the trend is your friend then ag is sitting in a good position. I don't believe in a 'fair price', but I think grain is where it is at for solid fundamental reasons.

 

Oil is pumped from the ground 365 days a year, and regardless of how much is in the ground the pumping capacity is fairly well understood. Nations don't have to have surges of oil, and neither are they likely to have severe cutbacks in a short span of time. In that sense the horizon for speccing and planning are longer than grain.

 

Right now the availability of grain in the medium term may be determined within weeks and I think we have a fair understanding that S America will not only NOT flood the market, but may have trouble with the status quo. No treaty, no politics will affect the outcome - and neither will the Fed. We don't know how the S American crop will turn out. And we have no inkling of what happens in N America this next season.

 

Corrrections are always possible after steady climbs, but there will be no bottom falling out of the ag market w/o good reason at this point IMO. There have been plenty of serious economic factors that could have gutted things long before this and it hasn't happened. Gold could collapse or any other industrial material that can't be eaten, but food security is much more important than gold or anything else when supplies are uncertain. When it appears that food production conditions are likely going to trend above the levels of consumption then the downside becomes more dicey. We aren't there yet.

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Senior Contributor

Re: Panic selling

most farmers I know are pretty much sold out of 2010, and have a good jump on forward contracting 2011. I think we are closer to panic buying than panic selling.

 

I know I wish I had more 2010 to sell, and I am sure not going to short this market trying to recoup lost profits. It would be like getting in front of a fast moving train.

 

Can you imagine how the shorts are scrambling to meet margin calls after last friday's action?

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Advisor

Re: Panic selling

I guess I remember too well the bottom falling out when Carter slapped a grain embargo on Russia after they invaded Afghanistan.  Can't remember where I left my cell phone but I sure remember that.

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