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| The fundimentals for a long time as the market was rising before the low yield reports suggested the price should be lower. We had more than enough supply of all grains. Even the Russian deal only depletes stocks to more manageable levels (we had too much). However, Frank the fund buyer had orders to buy into commodities and he got it done and had time to catch a broadway show. Now we actually have some fundimentals with lower corn yields in many very productive areas. To be sure other areas will make up a little of the short fall, but it appears that 130bpa where 200bpa was typical will put a dent in production numbers. Still we will have enough and it remains to be seen if the projected carryover is considered adequate or tight. We still have Frank to contend with and this new information has made his initial market buys look pretty good, so why not buy more (trees grow to the sky, it's not his money anyway).
We are in for a ride, but probably not a 2008 ride (bad economy, less dollars flying into wallstreet). At some point supplies will be deemed more or less adequate via rationing or just plain 'we had enough all along' and the smart guys in the room will look for a way to short the market. They'll be right eventually because they have enough money to be right (when did large position shifts ever go unnoticed by the trade). In 2008 the ride ended pretty quickly going into harvest, but we had a decent crop to stop the show. This time I'm guessing the uptrend will last through the winter and the february report, as it did last feb, may end up being the turning point (one way or another, but probably down).
The overall 'boundary conditions' are that we have are high prices which bring in more production. This new production (and more production from currrent acres since prices support more intense management) doesn't hit the market all at once, but in time we'll be over producing as usual - we always do. Does that make me a bear? I'm not sure, but I do think selling at profitable levels while they exist is a really good thing. 90% of my short farming career involved selling at near break even prices with an ldp or gov't program filling in the gaps - doesn't seem like those days are gone forever given our past.
Thanks,
Pat
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What's your market calls this week?
