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| I believe the crude oil market & gold, yesterday, surprised even the bulls. The action is related to Middle East concerns re: Turks, Kurds & progress in Iraq. The big question: is this a temporary up move or are we moving to another price plateau? Additionally, Oil inventories in the major countries did not build in August, a month when normally supplies increase.
From where I sit, the Federal Reserve looks to be between a rock and a hard place; can interest rates be reduced in the face of obvious inflationary pressures. Will $88 crude finally effect consumer spending? Higher oil creates more dollars - possible more upside pressure on the Euro as more internationals switch from the dollar to the Euro in which to transact business. Or, will the dollar stabilize here in reaction to a possible threat of stable interest rates? I don't have a clue. I do know, if we are truly in a crisis situation, and these oil prices are maintained, production costs are going higher. A new variable has entered the equation.
The wet conditions in the western corn belt is of some influence, but not much, as improving weather next week is on the horizon and harvest progress is slightly ahead of schedule; except the corn and soybean crop is not growing in size as various problems appear associated with wet conditions.
Basis improvement will hinge on the growth, or decline, of the visible supplies of grain, transportation difficulties and price levels of futures. If futures put a top in here and decline into a trading range, the basis will strengthen when producer selling slows.
I do know, I do not want to see KC March wheat closing below $8.43..if it closes over $8.96 I think new highs are possible. In my previous experience in markets with inflationary concerns, the market does occasionally look at new crop replacement costs.
Bottom line: we are suddenly riding a new horse, maybe for only a quick trip, or maybe inflation concerns will override, temporarily, south american weather..while still crucial as the soybean balance sheet is tight...wheat supplies are tight...
It is time to be more prudent than usual. While the technicals don't appear that bullish..the market feels "higher" to me, but that is pure speculation. | |
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The Big Risk -Questions
