Feb

23

Ag Futures, from Bud Conrad

February 23, 2011 |

Yesterday's across the board collapse of ag futures is a very serious move. Lock limit in most grains etc.

It looks like wheat and soybeans started to roll over a few days ahead of cotton. The nearby is down almost twice the daily limit, and the rest are all locked. It certainly is unusual and may be a solid confirmation.

Steve Ellison writes: 

Has the "realizing market" begun? Roy Longstreet in Viewpoints of a Commodity Trader said that some of the best profit opportunities are in realizing markets, when price is driven by the market's realization of some fact. For example, stock investors realized in 2000 that most of the Internet companies that had been valued on clicks or eyeballs would run out of cash long before they could become profitable.

Russ Sears writes:

The agri oil boom bust is a spiraling cycle. Oil goes up lowers economy growth, commods like grains go down but then grains substitute, grains go up oil countries populace go hunger/revolt oil goes up, less economy growth but …the cycle is becoming clearer.

Gary Rogan replies: 

Russ, I appreciate the explanation, this is very helpful. On the other hand, the original contention was that this is now a "realizing market". Has the market suddenly figured out this spiral, in the sense that oil going up will definitely (in the economic, not speculative sense) cause agri price to go down because the middle east is on fire? A case can be made that fertilizer prices or agri fuel costs are more important than some destitute people becoming even more destitute b/c of high oil prices and what, not eating any more? Or that raging inflation can manifest itself unpredictably in various commodities, or that transportation costs will raise import agri prices. I'm not sure this is equivalent to everybody figuring out in March 2000 that the Internet emperor was a bit on the under dressed side. 


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  1. Jeff Watson on February 23, 2011 9:51 am

    With the recent prica action across the board on ag futures, why would one be surprised to have a day or even a week like that? I’ve been expecting something like this for a couple of weeks and am hedged so it doesn’t matter anyways, Much to the chagrin of most, markets can’t go up every day. Fact of the matter is that the price moves in the ags can be just as violent as any moves in the metals, but people get complacent, thinking that corn is only going to have a 3 cent range, people from other markets getting into grains, thinking they are “easier” and making mistakes like going long corn into the crop report etc. Ceres is much like the mistress except his treatment is more like a prison rape.

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