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Contributor

Silver Drags Corn down...Again

Here's another market mover that makes absolutely NO sense; Silver futures have begun a way overdue correction, with newly-raised margins hitting the small traders hard. The net result is dragging corn down a rat-hole...again. Makes zero sense. Corn and silver have zero relationship...so we can once again blame the funds for seizing on this silver event to move corn. Only 13% of the crop is in the ground, which is still wet, with more rain to follow in certain key growing areas. So what do we do? We sell corn. Makes no sense whatsoever...Of course, I am long July at 738, & fed up again!

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16 Replies
Veteran Advisor

Re: Silver Drags Corn down...Again

YOu day traders crack me up!  Not saying I do not feel your pain just gotta remeber that every day is different and sometimes the rational of the market isn't all that rational. This is gonna be fun to watch. Time said it a while ago. the weather markets usually peak before the event is over. So just wait soon we will be hearing of a dry forcast that will lead to drought and the grains will be on fire.

Oh yea silver needed to correct but that doesn't mean that it isn't going back up. You are right tho the connection between corn and silver is minnimal. That doesn't mean that it isn't going toimpact things. 

The dollar is on the combat bots rally so wait for this to pass. Sounds like if Pakistan is really upset and they can get the other faith based warriors to attack us somewhere we will get the dollar lower. When that happens it may actually be hard onthe grains. this is an interesting scenario we are about to play out.

Add to that there is no way we get the intended acres planted they had hoped for and we could see a two sided trade where cash leads the futures market in grains. Wouldn't that be sweet irony!

Then again we may just chop around till this fall. ( but Ikinda doubt that.) I still think keeping physical control is gonna be key going forward. Don't forward contract and hold your margin exposure to a minnimum. It is clear they are trying to get rid of the small traders and the farmers!

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Senior Advisor

Re: Silver Drags Corn down...Again

Looking for relevance in any market today is an  exhausting process where every slite bit of slanted opinionated one liner is absorbed or blew off at the drop of the hat----fundamental is a word that means less every day--sanity holds little rearguard also 

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Honored Advisor

Re: Silver Drags Corn down...Again

If you look at open interest, you will see that the massive flood of money into commodities has ended and a reverse flow out of the food commodities is well underway. Since the price of corn has been massively influenced by money flows, it is quite predictable that a change in those flows will have more of an impact than the weather.

 

Besides, the market prices planting weather into the new crop, which is very close to its high. Trading old corn on weather is a pretty unexperienced way to play the game. IF you were a fund owning a bil bu of corn to hedge inflation, why would you dream of holding old corn at $7.50, when you can own new corn at $6.50. Just think about, these guys are pretty smart usually.

 

just my experience

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Re: Silver Drags Corn down...Again

It sure isn't easy to incorporate the volatitiy created by hot money flows into marketing plans but it sure is obvious that it is a fact of life- up down and around.

 

We've had a very nice run since Benanke came out of his burrow at Jackson Hole on August 27th, saw his shadow, yelled "risk on" and went back in.

 

It requires some emntal dexterity to keep focused on the fact that fundamentals may be X but money flow is at least as responsible for current price levels.

 

My thinking has been that the risk on trade has become ever more leveraged and long in the tooth but only the mildest signs of it cracking thus far.

 

Gold/silver ratio has historically been one good tipper on risk on/off and it has indeed had a pretty good bounce.

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Senior Contributor

Re: Silver Drags Corn down...Again

While there tends to not be much of a correlation between silver and corn, I think one can draw one basic similarity that has caused silver to tank in the past few days.  A year ago, the margins on silver was $4250 per contract.  Today, they are now over $16,000 per contract.  The fear that this will spread to other commodities probably has the small spec. trader on edge.  Due to this, they are taking their profits and exiting before the massive margins hit.  The CME has asked for the corn trading limit to go from 30 cents a bushel up to 50 cents a bushel.  It's already been said that if the CFTC allows this change, the margins will drastically increase. 

 

These markets have become a gambling casino especially since the electronic markets were introduced and the hours of trade expanded.  My broker has even contacted me asking if I want to have the ability to enter my own trades via my computer.  It appears someone with some power is trying to get a grip on the gaming casino.  Once this happens, a lot of the small spec. money will take their ball and go home.  If the corn market in terms of margin follows the same path as the silver market, specs could be looking at margins of $8000 plus per contract of corn. 

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Re: Silver Drags Corn down...Again

Hi Husker,

 

Not sure how much small spec money there is, at least in futures. Retail brokers are struggling as voltilty burns through people's accounts.

 

If there is smaller spec froth I think it over in the ETFs which do have a futures linkage, of course.

 

It is all one market, living and dying with liquidity.

 

Unfortunately as today's crummy Service PMI noted, this ramp job is actually hurting the real economy with margin compression as the Prices Paid index goes parabolic.

 

fwiw, h

 

PS- we don't want to forget that if the trend turns these long only instruments become ATMs for people on the other side.

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Veteran Advisor

Re: Silver Drags Corn down...Again

NOX good morning, Here is an interesting thought. I have firmly held that we have been trading a liquidity issue since last august, (admitadly I didn't figure this out till Dec.) but now with everyone sure we are baling on the liquidity trade ,hence the pullback in commodities even in the face of suportive fundamentals, What if the fundamentals take us to that 10 dollar range? 

I keep thinking that in many ways we have been a manged economy so now we might just be ready to take the managers for a ride.  A push from here on up in the commods will take all the wind out of the sails of bomber ben and his cohorts. I am not so sure we can go higher I just think this is a good time to stand on the sidelines and watch.

Are you planting yet?

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Senior Contributor

Re: Silver Drags Corn down...Again

small traders can't trade 25 and 50$ silver.

 

high margins? the longs can well afford it silver went fm 5 to 50.

 

exciuses

 

corn is over valued

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Veteran Advisor

Re: Silver Drags Corn down...Again

What is corn overvalued against?

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