WHY WE WILL BE THANKING THE MARKET FOR LOWER PRICES
WEEKLY GRAIN NEWSLETTER
Here are some not so fearless comments for www.dailymarketminute.com
April was a brutally ugly month for grain prices and last week did a majority of that damage. The main headlines for the puke selling included China canceling corn purchases, fund technical selling, weather, and a lack of bullish headlines.
The good news is that on Friday the market left a little hope with markets reversing a little bit and in the case of July soybeans we had a key reversal on the charts.
Now the question becomes what will happen in May, will the selling continue or can our markets add some weather premium back into the prices? Can our tightness with our old crop carry over which has had a very firm basis and inverted spreads lead to a bounce in the futures markets? As mentioned previously several times the way to get supply to the market is to firm basis, firm spreads, and then firm futures. With number 1 and number 2 already having check marks against them no one would be surprised at all if we get a bounce on the board.
Even some of the biggest bears in the industry have said that the market is overdone to the downside and that there is still hope on old crop prices. The funny thing is that there are far less advisors still saying that old crop prices could or should bounce. Now after a 30 cent loss for corn and beans last week and a dollar or so loss for KC wheat in the past couple of weeks far fewer are predicting higher prices. While even more have jumped to the bear side for new crop price outlook.
To me the more that jump on the bear bandwagon, along with the cheaper the prices get, the higher the likelihood is that we do go much higher.
Everyone knows that high prices cure high prices. Some believe the high prices we have had the past couple of years have created a little demand destruction. I am not in that camp because our rally a few years ago started from demand, not from supply or production concerns. It was from demand growth. The only demand destruction I see is from a lack of supply availability. We have seen some beans from Brazil get sold to the East coast of the US and some are worried that corn could do the same thing. We should keep in mind that nearly every year those areas have to import some from Brazil because we simply don’t have the supply in the right areas where the demand is. Freight from the Midwest to the East Coast isn’t cheap, so naturally buying harvest crops out of Brazil to the East Coast is going to happen at the tail end of Brazilian harvest.
Keep in mind that we could also see the opposite happen when the US starts harvesting and the supplies in SAM are dwindled down. With the Argy crop this year, it wouldn't be a surprise at all to see US soybeans in Oct/November get sent that direction?
In this advisor’s opinion, as the world grows and economy’s grow we don't have supply growth in the same areas as demand growth. How could we if demand growth comes from cities expanding along with lifestyle improvements or food intake increases that demand more protein?
Timing
We have thought for a long time that we would see a seasonal rally around this time, but we also know that both timing and price prediction are easier said than done. We do know that emotion physcology of the market does help create repeat type price action….
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INCLUDED IN THIS WEEK’S EDITION
Why this sell-off could be beneficial looking long term
Supply growth vs demand growth
Timing & price predictions
Using options to be comfortable in your marketing
How will China cancellations impact the markets going forward
Even the biggest bears think the markets are oversold
Will fear or greed drive our markets
Why demand will lead us higher
Psychology & emotions in the market
Will the lower we go now, create a bigger boomerang effect
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