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Middle Tennessee | Trying to stay up-to-date, you guys are my best resource, latest blog post below,
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You could be a boxer, dimly perceiving ropes in a square, spotlights, and shadows of rowdy spectators. A moment penetrates the obscurity and you gain an impression of the figure punching you in the head. In the way typical of dreams, the figure’s appearance is at once bear-like and whale-like. Then you go to sleep.
You could be a boxer or you could be natural gas in 2009, copper in 2011, wheat in 2013, or crude in 2015. Yes in that corner it has been the agent of deflation, taking out asset after asset, as central bankers shout from the coaches’ corner. Over the last few days, we’re left to wonder could global equities be shoved into the ring next? In that sector, losses over the last week are real and big, but probably not historic. Speaking of historic fiscal crises though, it seems to me they happen every decade, 1986, 1999 and 2008. Maybe we’re due for one.
Since my last post, two major events drove soybeans prices to their lowest in a decade. First was a shocker yield projection in the Aug. 12 report, and the second was the yuan moving in the way of the ruble and the real. And that’s not even to mention an environment where crude oil routinely loses 3 or 4% multiple times in a week. In fact, you could see see crude oil and soybeans tick together on the exchanges as though they were conjoined twins. Soybeans have “exposure” to China, and half the US crop goes to the export trade. With weak commitments of new crop sales, there is concern that the global export trade—which has exploded in recent years—may be beginning to creak. But there are still buyers, with conspicuously absent orders emerging this week. Spreads between South American and US offer prices are much firmer than last year. There is also USDA’s horrendous record on projecting soy carry outs. Recently, every year they say it will be 400 million bushels, and every year it turns out more like 40.
Wheat and corn managed to escape the Aug. 12 with a technical stalemate between buyers and sellers. The brief lows in these commodities set on Aug. 12 were fended off efficiently. Since then, trade has been dominated by short covering, and spreading against soybeans. The macro episode supported European and Japanese currencies, which discouraged sellers of corn and wheat. It seemed this week soybean weakness relative to Chicago wheat could be read off diverging values in the real and Euro. But whatever the Chicago wheat market knows isn’t being shared with Paris, Kansas City, or Minneapolis. Those markets continue to push new lows.
With all the knockouts recently, maybe the field will be clear for a comeback by the grains. South American weather scenarios could arise in the next few months with the current unprecedented global weather pattern. Market assumptions from the recent USDA numbers still need validation. And there’s the possibility of a reconsideration of grain’s value as an asset, as doubt grows about the other contenders.
Edited by LongKC 8/26/2015 10:31
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You Could Be A Boxer
