|
| There is a danger when in futures markets to be in too much of a hurry. Although it is possible, markets normally do not just spiral to the upside, they tend to make a leg up & then consolidate into a trading range.
Spring wheat is the exception as it would appear to be in a blow off mode.
My overriding thought these past few days, keeping in mind I got out of my original positions a month ago, is that we are past the opportunity point.
The purchase of corn above $5, wheat above $9 & soybeans above $12, are not opportunity trades.
At these levels, if you are a 20 lot trader, (100K) of grain, I’d be trading 10% of that.
We are at the month-end stage meaning some traders want to cash in profits & all of the brokers want their commissions for the month.
I feel, back in my mind, but don’t quite have it settled yet, we might see the something along these lines unfold. Anyone in the cattle business, above 60 yrs of age, will vividly recall 1974-1976, 1986 & the crisis, 1988, 1995-96 & was difficult to leave those periods absent some hurt. It is generally not the well-financed long-time cow man which can kill you. It can be the fellow with 10 cows, 25 cows & 50 cows & if they just keep coming, along with some dairy fellows finally fed up with that business & the bottom drops out of the cow market & the bottom then drops out of the trimmings market & it always has been very difficult to maintain decent fed cattle prices, since the expansion of the fast food industry, when the trimmings market goes south.
The futures premium built-into deferred hog futures may keep those fellows a little more optimistic, but we are seeing a few more sows in the kill.
At this point in my mind, I don’t see a massive liquidation, but there is always that risk once it starts. Any livestock producer near retirement may well say, “I’ve been through this deal before, it’s time to hang it up.” Leave the fight & forget the hay land & any grazing land which might be tillable, plant a few beans or whatever & take a cruise.
A month ago, the market was concerned with SA weather. It appears with the exception of Argentina, the crops may not be bumper yields, but slightly above average.
Markets anticipate. It is February within two more days & I think some hard plans have already been made & it will now be the swing acres and weather.
I think this ‘bidding for acres’ is getting to be an old story.
Overall, I want to be bullish on beans and wheat, but I would prefer these markets wash out in a big way to the downside, which they often do in February and March, and offer a better opportunity to buy for a possible bull play into late June and July.
I can build a theory, that all of these acres will not be needed if prices remain at current levels for any extended period of time.
Dave is far more qualified to address the economy.
I view it in a simple fashion. Our banking industry is in a shambles. As a first step, it needs an injection of liquidity in order to make loans and become profitable.
It may well require 10 years for another building boom. The qualifications to borrow have been raised, maybe overdone. This is typical of the lending industry. Those in foreclosure have zero credit. Those folks strapped for cash, and a lot of them, have no credit. Those folks in good shape, quite possibly don’t need another home.
We have a ten month supply of homes, actually nearly twice that much if you analyze the commerce department detailed reports.
Our manufacturing industries have shrunk. So, what do we have to export? Ag products & airplanes (& ex-bankers).
The real key now, in my mind, is jobs. This is the next shoe. We need to retain a level of profits in business & keep the consumer funded. This requires tax incentives, easier money to create new jobs.
I am not going to get bearish on the stock market here; the federal checkbook is open and may yet open wide. Congress has acted very quickly in this deal; I suspect there have been many, many private meetings between key congressmen, the Fed & the Treasury. Everyone is posturing & standing on one foot & then the other but the rails have been greased & this train is going uphill, in my opinion.
If and when we see a sharp rally & some sideways movement, then I am going to concern myself with the stock market.
IF……the future export prospects remain decent (above normal, not red hot as they are at this moment) I feel agriculture is in a good position for several years. If we maintain a cheap dollar policy, it could be exceptional.
As I say, I feel constructively towards oilseeds & wheat if we can get a price break and buy back some additional demand; I think cotton could enjoy a real run & am watching that now.
Too tired, beginning to ramble.
| |
|
Questions for Dave and Senior (and others)-
