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Red River Valley | I agree with most of your thoughts.
The back and for the in the Market has almost always been that of the quick spec money lurching from one side to the other.
The direction longer term is from the supply and demand
and the cycles are from the belief OF
So here is a breakdown of a super cycle __IMHO
the rise starts with and event that shows a longer term demand driven event ( ethanol , china ) this is the time frame that specs lead to yearly gains, and farmers don't react with long term purchases because they think it is just a short term up trend which will be solved by next years production.
It is driven to its near peak by the belief that the producers can not cover the peak demand ( Remember when the big investors were talking about Farmers driving Lamborghinis ) and all of the talk about peak everything ( Corn , Oil , Copper ) early in this period is when the big Long only hedge funds get funded like crazy and the Farmers really started to ramp up spending going for the peak grains we can't possibly grow enough of this stuff- cost be dammed you have to get it NOW because they are not making any more of it.
The peak comes with some trigger event that unleashes all new production and the realization that demand is met mostly with technology advances.
At this point comes the realization that peak was not and demand is covered once we get to that spot the money guys ( specs believe that short falls will be covered in the next season ) and the Longer term long only hedge funds start to see redemptions of their funds which forces them to move out of some positions and they also come to the realization that the Industry has solved the long term we can never produce enough issue that were once thought to be there.
With that the long only funds use rally's to get out the spec funds go back to the lurching from onside to the other and the producer needs to get his spending problems solved before the bank solves them for him.
At this point we are in the last part of the cycle, We will have rallies as the funds lurch to and fro , they will be at levels that seem to follow a down slope and with each lurch the highs will never get to were most need and the lows will go to were most can't handle until we get our cost of production in line and we get ready to build a bases for the next go around.
the key is having dry powder for the bottom of the wagon wheel track which in and of itself is hard to do let alone having faith that after a few years of losing money, equity, and friends you still have the ware withal to pull the trigger on spending that dry powder.
Yes timing the jump from one side to the other is an issue, and not drowning in the process is a goal.
as always time will tell | |
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might have something brewing in the Grains
