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| At one time the players were all tied into production, storage or usage with some speculators for excitement. Of course, excitement was a 5 cent move for a long time. With this cast of characters the price arrived at was generally about what end users were willing to pay and what producers would sell for. It's still a commodity and as such price tend to run towards the cost of production (the point at which selling really stops - or at least should). Today we have the turbo charger of speculators/funds/whatever amplifying the normal process of the market. It wouldn't be a big surprise if funds drove the market far below the cost of production, but hopefully buying interest would go nuts once that happened (ie. lock it in).
As always there is little to complain about because we have enjoyed demand killing high prices for way longer than fundamentally driven since many end users stopped making money dollars ago. Keep in mind the end user isn't selling a commodity, but a value added product which traditionally requires much more input $ than just feed. Cattle numbers are not down because cowboying is unpopular. With the turbocharged market we end up taking the bad with the good.
My take on the future is that eventually there will be some political shifts that cause business to have a more stable environment (some decides we've 'done enough for now'). In that event the economy at large starts doing better and investment in commodities becomes the red headed step child that it was for many years. The result is back to ADM, Cargill, China, etc. pretty much making the market which means our price moves closer to COP and we take rally's really seriously (no more it's $8 and I'm waiting for $10 instead it just rallied from $4 to $4.50 and I'm selling).
Ron Obvious Consulting | |
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Going to get all philosophical this morning
