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Artifice
Senior Contributor

if indexers copme out.

There always seems to be a layer of anger against big time speculators that move markets at will, as if that power exists. Markets will go where they are willing anyone trying to force something will soon be non existent.

 

Index funds , which cam about in big force in the last few yrs are what I think deserve attention here, when it started it was “its about time, sure will help the corn market! Etc.

 

Reality is commodities in real terms go down over time. The “real” COP goes down, prices tend towards the COP. In futures many markets have negative returns overtime because of the roll costs/carry built into prices.

 

No discussion 3 wks ago, again, imagine if INDEXERS decide they have leartned their lesson, CORN etc, are not capital investments, but inventory trades, just being long over time, isn’t going to work.

 

Producers have benefited big time, having this crop of record spec length to earn from.

 

What isf it comes out, say 65% of the length? What would the effect be the same as when they cam in, only of course down? My guess is that would put in a secular low,  but how low might they go? Possible lower than 95% can imagine, thus my idea 3 wks ago for OTM puts, a 1/25 odds play normally, here ¼ and if it is a win it is BIG.

 

I think a good strategy for producer length heading into summer/fall 2010.

 

Artifice

 

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14 Replies
aginvestorr
Contributor

Re: if indexers copme out.

Cost of production measured in dollars is going up constantly lately so commodities are headed up longterm in my opinion. 

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Red Steele
Veteran Advisor

Re: if indexers copme out.

I agree on the cost of production. A decade ago I could grow and sell corn for $2 per bushel and make ends meet. That sure is not going to happen today.

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northcorn
Contributor

Re: if indexers copme out.

Red take land cost out of the mix and tell me what you can raise it for. 

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pigeon kilr
Contributor

Re: if indexers copme out.

So Artiface is suggesting that corn will trade below the $2 mark with that lower than 95% believes remark? Weren't you on here in 07-08 pretty much with the same song and dance?

 

With the global corn supply running at a 60ish day supply one of the tightest on record. Obviously you don't believe in supply and demand as having any persuasion what so ever, eh? Most everyone knows mostly likely the USDA will trim stocks this week, and most everyone knows they overstated last years corn crop, never taking into account the ultra low test weights and the many acres left standing clear into this spring awaiting harvest.

 

Will the market trade down? YES! Will the market trade up? YES! Will the market trade as you suggest? Mostly likely NOT!

 

 

 

Artifice
Senior Contributor

Re: if indexers copme out.

"Real" meaing inflation adjusted.

 

Adjusted for inflatrion teh price of corn goes down long term.

 

Artifice didn't say $ 2, no projection was made.

 

if we go into a INDEX liquidation phase,     it could be bug is what I said.

 

 

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Jim Meade / Iowa City
Senior Advisor

Re: if indexers copme out.

There seems to be some uncertainty in the analysts' minds as to where we are likely to or could go.  Could go up if La Nina comes in, could go down if funds pull out, etc.  What will China do? Etc.

I'm happy with sales I've made, wish I'd made more and don't see any alternative to selling out of the rest of this year's crop.  If I sell out over the next few weeks then I won't worry about the bottom falling out, except that maybe I missed a speculative chance to short the market.  If prices get cheap enough I might turn my new crop shorts into synthetic puts , also partly on speculation.

Whatever money I'm making being short the new crop on the  board just tells me I should have sold more earlier.   Marketing is not getting any easier.

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jrsiajdranch
Veteran Advisor

Re: if indexers copme out.

Artiface, The market has never cared what it cost me to grow a crop it has only cared about what somone will purchase it for and if I will sell at that price. And farmers always sell!

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jrsiajdranch
Veteran Advisor

Re: if indexers copme out.

Artifice in your own format here. If the market cared about cost of production it would never have gone so high in 08 as it was well above cost of production!

JR

 

 

 

JR again

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oncearound
Veteran Contributor

Re: if indexers copme out.

the thing about Artie that gets me..........? 

 

he speaks about unknowns as if they are a given!!!! and knowns as if they are merely day dreams in some empty headed farmer!

 

i think everyone understands his premise, being that hedging early on in a marketing year is a risk management item that normally works. but most times he fails to understand numerous underlying dynamics that are at work today globally in Ag. the 1990s are long ago history in which his grains thoughts seem to be directed to, or taken from.

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