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Middle Tennessee | Guys, thanks for putting up with me in recent days...Soon to begin dreaded autumn courses which should mean less claptrap from me, but I did update my blog with this market summary,
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Sometime in the first week of August, a prominent observer on my favorite farmer chat board (JF) conjectured the possibility that, for the second consecutive year, the USDA's August report would stake a price extreme. At the time the most succinct adjective to describe the market was "sick," and JF's commentary seemed like talk therapy for depressed bulls, who'd already maxed out their Prozac dosage and were still having trouble making it through the day without tearful breakdowns. Hedgefunds were short, getting shorter by the day. The weather and its effect on this unique crop weren't known, but guys like hedgefundfarmer knew heat in the forecast was going to bring the crop home, and the manic guy flush on the winning side of a down market is always more persuasive than a clinically discouraged farmer watching the value of his stocks and crops dwindle on a daily and hourly basis whatever the facts or uncertainties.
So JF said maybe the falling market would suddenly find the USDA's supportive arms beneath it, but what he did not tell us was that the soybean market was going to duck into a phone booth, and emerge in flashy colors with the ability to fly. That market raised one fist and in the blink of an eye was $1.50 skyward. "It's short covering!" no…can't be, the trend followers were short in wheat and corn…."It's booked sales for new crop well ahead of projections," well maybe, but $1.50 in seven sessions? "No, It's a weather market!" When the dry forecast stretched from a few days to as far as the models could see, the price charts didn't wait for debates on pod counts or whatever happened to all those South American soybeans from last spring, it just took off.
Corn's ability to escape the trap of its broken charts was not as impressive, but hey, its just corn. But if soybeans can't be stopped, ultimately corn can't be either. The first news out of the Pro Farmer crop tour was digested as unable to challenge credibility of the USDA's yield reduction. And the weather is gradually getting hotter and drier. Many guys for many days have discussed the prospects for just such an event, and its potential to surprise an oversold market. That potential may still be building with pressure on any coverage gaps for old crop, a deteriorating new crop, and record hedge-fund shorts sticking with their positions.
The wheat market was mostly left to its own pathos through all this. Guys who have been waiting for the major swing trade wheat against beans are still waiting, maybe they'll wait their whole lives. But, export inspections of wheat are 60 million bushels ahead of last year, an enormous bushel count for such an early point in the calendar, with Egypt out of the market and amidst Black Sea harvest pressure.
Edited by LongKC 8/20/2013 01:49
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Talk Therapy
