It has been the same old story about tight carryover stocks from the 2013-2014 crop that has kept this market supported but even that now appears to be giving way to reality.
Today's move lower in the November contract has set a new low for this extended bear market not only in terms of the low made but also the closing price.
At this stage, bulls have little to bolster their argument for higher prices except to pray for an early September hard freeze.
Is that possible? Sure it is - anything is possible when one talks about weather but farmers with new crop who have not secured anything in the way of downside price protection are literally playing with fire at this point.
Today's FOMC minutes definitely took on a more hawkish tone with even the doves moving more to the center. That is how it should be when a consensus begins to slowly emerge among those with some differing opinions. More and more it is looking as if the Fed is going to be moving on the interest rate front sooner rather than later. Again, this is not to suggest that we are going to see longer term interest rates spike; what it means is that barring any sort of economic downturn, these ultra low rates are a thing of the past at this point. So enjoy them while you can.
Geopolitical events could still induce safe haven flows into bonds and that will work to lessen any severe upside rate movements but it does appear at this point as if the die is cast.
I came away from reading those FOMC minutes with the view that the Fed is anxious to get back to a more normal monetary policy stance.
If this is indeed true, it is hard to make the case for a weaker Dollar given the weakness in the Euro Zone and in Japan when contrasting the overall economic footing of the three respective zones.
In such an environment, commodity prices are going to struggle as an asset class. Individual markets will then have to rely on their own specific set of fundamentals to move higher, but that is how it should be. These macro plays where hedge funds and other large investors buy blindly across the entire gamut of commodity markets tend to greatly distort prices. That eventually leads to an oversupply as those sectors respond to the higher (speculative induced) prices by increasing production. The result is a sort of Boom/Bust cycle that takes place. I think we are seeing some of that right now.
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