WHY WE COULD SEE NEW ALL-TIME HIGHS
WEEKLY GRAIN NEWSLETTER
Here are some not so fearless comments for www.dailymarketminute.com
Tis this season as they say, not the holiday season but the weather market season has started for our grain markets. Just look at KC wheat price action to close out the week, with losses of nearly 20 cents on Thursday followed by gains of over 30 cents on Friday. With the main headline both days weather forecasts.
It is also the season of old crop new crop spreads. Showing extreme volatility, which in this advisor’s opinion is something that we need to help us achieve higher prices longer term. On Friday old crop May corn gained 8 cents on new crop December corn, while old crop May beans lost 10 ½ cents to the new crop November soybean contract.
When the week was done we had May corn a 1.06 premium to December corn, while old crop May soybeans had a 1.99 premium to new crop November soybeans.
So what does it mean that it is the season? While longer term as we see volatility coming from unknowns such as production and weather it means we have the possibility of adding some weather premium to our prices. It also means that some are selling the rallies, some are buying the dips, some bears are always selling and some bulls are always buying. Eventually all those that are entering into new fresh positions will have to close out and take the opposite side, so adding a little more players to the game because of the volatility and unknowns typically benefits farmers and helps lead to seasonal trends that typically show row crops bouncing in May.
If you think about it, the more farmers become price makers instead of price takers and the bigger farmers get the higher the likelihood of higher prices should be.
What I mean by that is farmers do not have to pre sell a single bushel if they choose not to. Some even have the option to simply build more bins and in theory never supply the product to the market. Buyers on the other hand either need to buy, close shop, or find a replacement product. So naturally we should see prices rise when farmers are busy growing a crop and not focusing on risk management.
Not to say that is always a good thing, because historically farmers have been well served to make sales, put in price floors, or engage in some sort of grain marketing price risk management when they don’t know what they will grow, when they are very busy with other operational things that take priority and focus. Typically if a farmer becomes nervous about his production a buyer that will eventually need to buy a product also becomes nervous about supply availability. This is the reason why seasonals have worked for decades in many commodities and why they will continue to be something to monitor in the future.
The bottom line is…
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INCLUDED IN THIS WEEK’S EDITION
Why we could see new all-time highs
Comparing history
Is the industry prepared if we see a lower yield
Spreads are wider than ever this time of year
Bullish fundamentals
Volatility in the markets
Food crisis
Risk management
Getting in the top 25%
Brazil & Argentina
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