Markets closed down hard behind fund liquidation and
technical selling; even a slight increase in producer selling as some advisors
put out sell signals after our markets failed to hold some chart support.
Corn was off 19 cents, beans were down 39 cents, KC wheat
was off 17, MPLS wheat was down 13, CBOT wheat was off 17, crude off over a
dollar, equities weaker with the DOW down 44 points, and the US dollar was
firmer.
Just a horrible day for the grains; the bad thing is no real
news behind the melt down. Rather just a session of Risk-Off, we do have
harvest happening with overall what one would say as better then expected
yields, month end, quarter end, and the big USDA report on Friday that each of
the last couple of years has been very bearish but also marked the lows.
Part of the reason for all of the risk off is just the simple fact that the
funds own plenty of grain.
Basis is defensive for the row crops; buyers just don’t seem
to be interested as many just have no bids. Now I don’t know that demand
isn’t there; I think we just have momentum going one direction and the buyers
sense that so they are pulling away; like they probably should and just like
producers do when the markets are going the other direction. Now when we
bounce or how high we bounce is partially dependent on whether some end users
are scaling in; using a little risk management practicing and cost averaging as
we go down. This statement is probably more for sunflowers then it really
is for corn and beans; as the fundamentals for both corn and beans still don’t
support a long term price break; the fundamental supply and demand both say
that we really need to curb a little demand and ECON 101 tells us that lower
prices don’t curb demand rather they add to demand.
Another question we really need to ask our self is are yield
really that much better than expected? If the answer is yes and we also
have a lot more supply then what we have thought for the past several months
then perhaps our markets are fair priced or even expensive? I don’t know
the answer to this; my gut says that longer term we have some upside in our
markets; but I still think we have rather good and very profitable prices that
need to have the risk managed.
Watch the report on Friday and hope that if it is bearish it
will be the start of a sell the rumor; but the news. But bottom line we
are going to need to find some demand or a good headline if we want to get the
fund back interested. Money flow trumps supply most days and right now
money is heading to the sidelines.
Technically the charts have done some damage and have really
opened up more downside potential. But at the same time they are very
overdone and due for a bounce.
Once in a while we talk about what to sell and what to
store. The corn wheat spread has widened back out; to where it now makes
sense to look at selling a wheat and perhaps holding corn; at least they are
not par like they were a few months ago.
One other thing that is quickly getting out of whack is
sunflowers – millet. From what I know I don’t think people will buy at
par; at par they will buy sunflowers. Now we have sunflowers under
millet; longer term I think that is bullish sunflowers; but at the end of the
day we still need overall demand and right now that industry is slow.
Please give us a call if there is anything we can do for
you.
Thanks
No comments:
Post a Comment