Sep

11

Grains, from Jeff Watson

September 11, 2014 |

One must note that the grain market is on its contract lows. 6 months ago, the mention of $5 Dec wheat would have gotten you laughed out of the room, and we're almost there. Same thing with Dec corn closer to $3 than to $4. Nov Beans blew through the $10 the other day and hasn't looked back yet. The gravitational effect of the nearest buck in the grain markets cannot be over-emphasized. Furthermore, the fundamentals like country movement, crop size, carryover, demand, and a few other things support the lower price theory. When beans were at $10.75, I joked that when they got down to $10, I would probably not want to own them at all. Same thing with $5 wheat.

anonymous writes: 

I have very few kernels of knowledge on the grains. But, hidden in Jeff's note I think are some essential points that apply to markets. First, the power of sentiment/positioning and the force of the subsequent shift or reversal of the same. Second, while moves often take time to develop when they do the move is often faster and farther than expected. Third, the momentum in prices that can be generated and the signaling indicators within those price changes and levels. Fourth, the fundamentals and/or perception thereof and the confluence they might have with other supporting factors. Fifth, how does the psychology and risk around such a situation develop and best be handled in terms of adding, cutting, reducing, etc..

Prospectively we might ask what other markets might display similar conditions now to the grains a few months ago?
 


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2 Comments so far

  1. Warren Quick on September 14, 2014 8:02 am

    I do not purport to understand all the powers influence the corn market. But as an Australian beef exporter watching unprecidented price rises this year on the back of surging beef exports to the USA. Record low USA herd size is the common explaination and i guess corn is a major feed component of your Beef industry. However, Cattle prices look in blow off mode to me and perhaps a bottom in corn could be found as the cattle prices reverse.

  2. Craig Bowles on September 24, 2014 5:24 pm

    The cooler summer reminded me of a few years ago when 5 or 6 volcanoes were erupting in Alaska and Russia. Someone sent me this link which was kind of interesting.

    http://michaelsnyder.mensnewsdaily.com/2014/09/the-number-of-volcanic-eruptions-is-increasing-and-that-could-lead-to-an-extremely-cold-winter/

    Also interesting was that stock buybacks slipped 1.6% last quarter since that has been one of the rationalizations for stocks moving higher.

    http://www.reuters.com/article/2014/09/23/markets-stocks-usa-idUSL2N0RO1EW20140923

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