Here are the harvest progress numbers provided by USDA this afternoon.
Corn is at 46% complete while Beans are at 70% complete.
In going through the reports, excellent progress was made in the Western region of the Corn Belt. That fits with the weather conditions which showed that big front which touched off a large amount of rainfall, moved rather quickly out of the Western region before taking its time to clear the Eastern Belt.
Let me give you a sense of the numbers to illustrate this:
Iowa is now 81% complete on bean harvest compared to last week's meager 61% and the previous year's 85%. The five year average is also at 85% so Iowa has essentially caught up with the averages and looks to be in very good shape on the beans.
Minnesota is at 94% compared to last week's 85% and the previous year's 89%. The 5-year average is 87%. Minnesota is running ahead.
N. Dakota and S. Dakota are both well ahead of last year's pace and the 5 year average.
As one moves more towards the East, we can see the impact from the storm. Illinois is at 63% complete versus 37% last week and 83% last year. It's five year average if 77%.
Indiana is at 50% complete versus 31% last week and 76% last year. Its five year average is 75%.
Ohio is at 50% complete compared to 36% last week and 80% last year. Its five year average is 73%.
As you can see from the numbers, Harvest progress has lagged as one moves West to East. This explains the extraordinarily wide basis being seen in the meal and beans from the Eastern Belt. Processors have been scrambling to get beans over there because of the lag in getting the new crop flowing into the pipeline.
The weather however looks pretty good over in the Eastern Belt from Tuesday on through the weekend at this point with some cooler but dry conditions forecasted from what I can see at this time. There looks to be a lot of sun which should allow the harvest in that portion of the belt to begin to play catch up.
Let no one be surprised to see a sharp jump in the numbers we get next Monday. The size of these combines and the speed and accuracy at which they can operate is stunning. Look at how quickly Iowa caught up in one week's time with good weather!
At some point, once these newly harvested beans begin flowing into the pipeline, any shortage in that EAStern belt is going to be eliminated. That is when the temporary spike in meal prices - and subsequently in beans - should come to an end.
We have to keep one eye on S. American weather but right now, the rains look timely and mostly sufficient.
The corn is where harvest is lagging the most and that is perhaps the reason we are seeing more impact from this sharp rally in the meal than we might otherwise see at this stage of the season. There is nothing to indicate any damage to the crop that remains unharvest but some are sticking some premium into the corn until they see a larger % of the crop in the bin.
Farmers have been focusing on bringing the beans in and leaving the corn to dry down further.
Let's start with Iowa which is 36% complete on the harvest compared to 19% last week and 52% last year. Its five year average of 65%. Obviously it is well behind.
Minnesota, ahead on the beans, is behind on the corn with 41% complete compared to 16% last week and 44% last year. Its five year average is 63%.
N. Dakota and S. Dakota are well behind as is Nebraska.
In the Eastern Belt, Illinois is 59% complete compared to 43% last week and 71% last year. The five year average for that state is 72%.
Indiana is 44% complete compared to 31% last week and 57% last year with its five year average at 60%. Lastly, Ohio is 36% complete versus 23% last week and 46% last year. Its five year average is 44%.
I can say essentially the same thing about this as said about the remaining bean harvest - the weather for the remainder of this week looks pretty doggone good to allow substantial progress to be made.
At this point, technical-based buying generated by some initial buying based on the slower pace of harvest has now unleashed a torrent of both short covering and new longs in these grain markets. Couple the strong basis for meal in the Eastern Belt and funds have been going beserk in their buy programs. At some point, and I believe we are soon reaching that point, new crop supplies are going to start flowing in considerable size and that is going to unleash the hedge pressure that has heretofore been absent. It is the absence of that strong hedging-related pressure that has produced a pocket of air ABOVE the grain markets and allowed fund buying programs to essentially move prices unimpeded to the upside.
Simply put, the funds are not selling at the moment and neither are the big commercials ( YET) in size. Once the fund buying meets up with sufficient supply to absorb it, I believe that the grains are going to come face to face with the reality of massive supply looking for a home and competing for storage and transportation availability.
In looking through today's numbers, I cannot see any further justification for running the meal, and thus the beans, significantly higher especially given the forecast for harvest this week.
The corn might still try to keep some premium in it but a fair amount of that premium is already accounted for. With progress moving only one way at this point, and that is higher, maintaining much more of any sort of premium in corn related to harvest delays seems unwarranted.
My concern for the grains remains the same - when the funds are done buying, having chased prices to such lofty levels considering where the beans and the corn were at the start of the month, who is going to take their place on the buy side?
I guess we shall see soon enough, shall we not?
الاثنين، 27 أكتوبر 2014
Soybean Meal Continues Pulling the Grain Floor Higher
Last week it was the 100 day moving average in the meal that was the talk of the town. Today, and this week, it is the 200 day moving average. Meal has now taken both of them out and has set in motion a blast of buying by hedge funds in spite of the fundamentals associated with improving harvest progress and soon to be hedge pressure.
Farmers watching the rally are sitting tight on sales of new crop ( (which is a mistake in my opinion ) as most of them now want to see how high the rally in the beans and in the corn will go before they let go of their newly harvested crop.
The problem with such thinking is that it essentially turns the farmer into a speculator. Rallies that fly in the face of fundamentals are bewildering but they can flame out faster than they began leaving a lot of people holding the bag at the highs wondering what they did wrong.
My suggestion to farmers who think higher prices are yet to come is to not hold off on selling any new crop but to sell a portion of it and replace that with call options if you think you can fetch more down the road. What you do not want to do is to end up selling at the same time all of the hedge funds do as well!
Once processors have new crop supplies of beans flowing into the pipeline, especially in the Eastern Belt, basis is going to move swiftly lower in my view. The buying frenzy that has been seen in the meal will then become a selling frenzy. Again, I have no idea when that will occur nor from what level it will take place but I am watching several key technical levels to get a sense of when the hedge funds will have awakened the big commercial hedge pressure machine.
For now, it is the funds in the driver's seat.
Meal stalled out last week at EXACTLY the 50% Fibonacci retracement level of the collapse from the May high near $412. It flew through that level this morning and is now threatening the 61.8% level near $368. Quite frankly, I am going to be stunned if it can succeed in clearing that level although with the Dollar showing some weakness today and the macro boys buying into commodities as a result, anything is possible. If it does, we could see this thing run all the way to $380 before reality sets in.
Meal had traded in a range between $360 and $340 for nearly two months ( July-Sep) before it broke down in the face of the massive bean crop expected. That it has not only returned to this former "value zone" but has exceeded it, is something that I never expected to see and I have seen a lot of weird things in the bean market over the years.
There is some chatter occurring that late rains in Brazil have turned some farmers there away from beans and towards cotton but one has to be careful with such unconfirmed rumors. More often than not, these sorts of stories arise when people are trying to come up with some sort of fundamental reason to explain inexplicable technical price action.
The technical price action has many analysts now confidently predicting a harvest bottom has been forged and that the grains are going to work higher from here. Put me in the disbeliever camp but until I see some signs that these funds are through playing "chase prices higher and move more demand to S. America" I am very careful. Those computers are unacquainted with "value" and will press in the direction that they are programmed to go until something halts them and makes them reverse.
This afternoon we'll get an update from USDA on the harvest progress.
Farmers watching the rally are sitting tight on sales of new crop ( (which is a mistake in my opinion ) as most of them now want to see how high the rally in the beans and in the corn will go before they let go of their newly harvested crop.
The problem with such thinking is that it essentially turns the farmer into a speculator. Rallies that fly in the face of fundamentals are bewildering but they can flame out faster than they began leaving a lot of people holding the bag at the highs wondering what they did wrong.
My suggestion to farmers who think higher prices are yet to come is to not hold off on selling any new crop but to sell a portion of it and replace that with call options if you think you can fetch more down the road. What you do not want to do is to end up selling at the same time all of the hedge funds do as well!
Once processors have new crop supplies of beans flowing into the pipeline, especially in the Eastern Belt, basis is going to move swiftly lower in my view. The buying frenzy that has been seen in the meal will then become a selling frenzy. Again, I have no idea when that will occur nor from what level it will take place but I am watching several key technical levels to get a sense of when the hedge funds will have awakened the big commercial hedge pressure machine.
For now, it is the funds in the driver's seat.
Meal stalled out last week at EXACTLY the 50% Fibonacci retracement level of the collapse from the May high near $412. It flew through that level this morning and is now threatening the 61.8% level near $368. Quite frankly, I am going to be stunned if it can succeed in clearing that level although with the Dollar showing some weakness today and the macro boys buying into commodities as a result, anything is possible. If it does, we could see this thing run all the way to $380 before reality sets in.
Meal had traded in a range between $360 and $340 for nearly two months ( July-Sep) before it broke down in the face of the massive bean crop expected. That it has not only returned to this former "value zone" but has exceeded it, is something that I never expected to see and I have seen a lot of weird things in the bean market over the years.
There is some chatter occurring that late rains in Brazil have turned some farmers there away from beans and towards cotton but one has to be careful with such unconfirmed rumors. More often than not, these sorts of stories arise when people are trying to come up with some sort of fundamental reason to explain inexplicable technical price action.
The technical price action has many analysts now confidently predicting a harvest bottom has been forged and that the grains are going to work higher from here. Put me in the disbeliever camp but until I see some signs that these funds are through playing "chase prices higher and move more demand to S. America" I am very careful. Those computers are unacquainted with "value" and will press in the direction that they are programmed to go until something halts them and makes them reverse.
This afternoon we'll get an update from USDA on the harvest progress.
Crude Oil Weakness Continuing
Two weeks ago during the trading session, crude oil briefly dipped below the $80/barrel level. It did not stay there long however. This morning, crude has revisited the sub $80 level. This is something that we should monitor closely.
We will want to see how this market closes today as it has not had a close below $80 since 2012.
Weak crude prices, while generally good for the consumer ( cheaper energy costs ) and some business interests ( transportation related), are a sign of sluggish economic growth generating insufficient demand to keep up with available supply.
Equity markets are lower as I type these comments as well with the Yen higher and the bonds higher. More safe haven plays are in vogue at this point. Deflationary pressures are back once more on the minds of traders it would seem.
Gold is getting tugged between being a safe haven and the general trend lower across the commodity spectrum.
Macro trades are on display once again.
We will want to see how this market closes today as it has not had a close below $80 since 2012.
Weak crude prices, while generally good for the consumer ( cheaper energy costs ) and some business interests ( transportation related), are a sign of sluggish economic growth generating insufficient demand to keep up with available supply.
Equity markets are lower as I type these comments as well with the Yen higher and the bonds higher. More safe haven plays are in vogue at this point. Deflationary pressures are back once more on the minds of traders it would seem.
Gold is getting tugged between being a safe haven and the general trend lower across the commodity spectrum.
Macro trades are on display once again.
السبت، 25 أكتوبر 2014
The GIAMATT Crowd and Perpetual Motion
For hundreds of years, dreamers, theorists and inventors, along with a huge assortment of quacks, hucksters and con men, have sought to either create or to peddle to the unsuspecting, a machine that when once set in motion, would continue moving without the application of any outside energy to feed it. Of course science has long ago disproved that this is possible because of what are widely acknowledged and irrefutable laws that govern our universe - namely the first and second laws of thermodynamics.
This is not a site dedicated to the exposition of those laws nor is this post directed at refuting the theory of perpetual motion.
What it is directed at this time around is yet one more novel theory concocted by the GIAMATT crowd. For newer readers this is the short-hand abbreviation I have assigned to the "Gold is Always Manipulated All The Time" crowd.
That perpetual motion has been disproved has not stopped some from promoting it in order to create an income. Same goes for some in the GIAMATT group - that their wild and logic-twisting theories have been disproven time and time again, does not stop them from coming up with yet another and another and another. One must hand it to them - they seem to never grow weary, shame-faced or at a loss in their ingenuity at devising one more scheme to justify substantially higher gold prices.
I have chronicled some of these in the past three years and have written many refutations in an attempt to provide some balance that has hopefully spared some of their victims from losing a substantial portion of their hard-earned wealth.
Please see this previous post for a laundry list and note that this is not all of the theories that I have seen over this time period but only the more prominent ones.
http://traderdannorcini.blogspot.com/2014/10/gold-mining-stocks-continue-to-sink.html
I would like to focus in on the latest. I am forced to admit this is one that stretches the ability of those whose minds work in a logical manner to conceive of anyone falling for such a twisted example of convoluted and contradictory assertions.
I referenced this the other day in that post linked above but here it is in a nutshell.
The big gold ETF, GLD, is being drained of its gold inventory in order to meet insatiable demand coming out of the East and that this is BULLISH for the metal.
Let's start with a brief history of GLD, ACCORDING to some of the very same people promoting this latest theory.
Remember, in their mind, it is a contest between the PAPER gold markets here in the WEST and the REAL ( their word) gold market, which is in the far East.
Their claim is that were it not for manipulation of the gold price here in the West, that gold would be substantially higher because the true price would be set in the East by the physical market there. According to their new priests and prophets which lead this gold cult, once all of the gold is finished being drained from GLD, it will liberate the metal from the constraints being placed upon it in the West and the price will soar. Therefore, according to this view, FALLING GOLD INVENTORIES in GLD is ultimately WILDLY BULLISH!
( Please note that every single one of these theories is ALWAYS wildly bullish and PROOF POSITIVE that sharply higher gold prices are imminent).
Let's proceed to dismantle this latest theory by taking a trip back in time. When GLD was first introduced, a large number, if not an outright majority of those in the gold bug community swore up and down that its introduction was further evidence that the powers that be in the West were intent on siphoning true demand for gold AWAY from the physical gold market ( remember - in their mind that is the real gold market ) by creating another PAPER vehicle, just like the Comex. This paper vehicle would divert millions, tens of millions and hundreds of millions of dollars into an entity which could be manipulated by the "evil bullion bankers" and thus serve as a sort of Trojan Horse ( remember that phrase because it was extremely popular back then- Trojan Horse).
The big case against it however was its auditing process and specifically the point that the custodian for GLD was none other than HSBC, one of the noted "conspirators" in rigging the gold and silver prices (their claim - NOT mine). In other words, it was a case of the Fox guarding the chicken coop as far as they were concerned.
Additionally, they railed against the Authorized Participants of GLD - Bear, Stearns, Lehman, Citigroup, Merrill Lynch, Goldman Sachs, JP Morgan, UBS and Morgan Stanley as being unfit to be associated with anything the least bit related to gold, since they could not be trusted ( again - THEIR claim; NOT mine).
I distinctly recall the mockery and vociferous criticism raised by many of the ringleaders in the GIATMATT crowd when referencing the reported holdings of gold in the ETF. They screamed again and again that the auditing process was "a joke", and could not be trusted as they sarcastically put the following words in the mouths of those who managed the ETF:
" JUST TRUST US, the GOLD is THERE".
Do some of you remember this as well?
They cited the fact that the Trustee had no right to visit the premises of any subcustodian for the purposes of examining the Trust's gold as evidence that NO ONE COULD BELIEVE the REPORTED GOLD HOLDINGS in the ETF.
In other words, the GIAMATT crowd was reeking with disdain for any numbers coming out of GLD as unfit to be trusted.
Thus, they LOUDLY claimed that the gold was not there at all and that which was there was rehypothecated, subject to COUNTER-PARTY risk. This counter-party risk was something that they made a big deal about at that time.
Remember that other wild and popular claim that many of the gold bars were fake, being filled with tungsten?
All of their claims AGAINST GLD were to specifically DISCREDIT it as a viable gold investment vehicle that no one who really wanted to own gold should have anything to do with.
Here is the point - many of the same people who were mocking GLD back then and pooh-poohing the gold numbers it was reporting as its holdings, are NOW NEW BELIEVERS, NEW CONVERTS and have SUDDENLY had a REBIRTH of FAITH in the numbers coming out of GLD each day.
Now, some few years later, all of that Gold, Yes, the Gold that was NOT THERE in the ETF ( just trust us, the gold is there they said mockingly), the Gold that was rehypothecated, the Gold that had huge counter-party risk, and the Gold that was not really gold, but rather tungsten-filled bars is all being "RAIDED" and heading to the EAST to supply the insatiable demand from that corner of the globe.
I am not sure what world that many of my readers live in but in the world in which I live, this is what is referred to as hypocrisy. It is also one of the most egregious examples of illogic, inconsistently and blatant disregard for sound reason that I have ever seen in the arena of financial matters.
I guess these people who promote this sort of idiocy think we all have very short memories.
Then again, I suppose we should expect this sort of perverse reasoning when it comes to the gold cult. After all, this is just a sort of mirror image of the same "logic" that asserts that when gold experiences a sharp selloff at the Comex it is proof of "price suppression by the gold cartel banks". However when it experiences a sharp, blow your socks off sort of rally, that is normal, just, and righteous price action. Thus when it comes to the reported holdings of GLD, when they are rising, it is evidence that the numbers are bogus and should not be believed but when they are falling, it is incontrovertible evidence that the East is draining the ETF of all our gold.
Reductio ad absurdum perhaps???
To those readers who are actually serious-minded and are who are attempting to make fact-based investments or trades, rising GLD reported holdings are bullish for the gold price. Falling GLD reported holdings are bearish for the gold price. It really is that simple.
Don't fall for yet another hoax coming out of the GIAMATT cult. They see what they WANT TO SEE and not what is supported by the obvious facts. That is called "Observer-Expectancy Effect".
In closing here are two charts that illustrate perfectly what I stated in this last paragraph.
Here is the chart of GLD showing the rise and the fall in reported holdings.
And here is the gold chart:
Notice how closely the price of gold corresponds to the rise and fall of the reported holdings in GLD. Please note that I am NOT saying that there is a perfect correspondence in the daily price movement of gold in response to the reported holdings. What I am saying is that the general trend in the price of gold very closely mirrors what is happening in GLD holdings. When holdings rise, so too does the gold price. When holdings fall, so too does the gold price.
Keep that in mind when you come across yet another theory coming out of the GIAMATT crowd.
This is not a site dedicated to the exposition of those laws nor is this post directed at refuting the theory of perpetual motion.
What it is directed at this time around is yet one more novel theory concocted by the GIAMATT crowd. For newer readers this is the short-hand abbreviation I have assigned to the "Gold is Always Manipulated All The Time" crowd.
That perpetual motion has been disproved has not stopped some from promoting it in order to create an income. Same goes for some in the GIAMATT group - that their wild and logic-twisting theories have been disproven time and time again, does not stop them from coming up with yet another and another and another. One must hand it to them - they seem to never grow weary, shame-faced or at a loss in their ingenuity at devising one more scheme to justify substantially higher gold prices.
I have chronicled some of these in the past three years and have written many refutations in an attempt to provide some balance that has hopefully spared some of their victims from losing a substantial portion of their hard-earned wealth.
Please see this previous post for a laundry list and note that this is not all of the theories that I have seen over this time period but only the more prominent ones.
http://traderdannorcini.blogspot.com/2014/10/gold-mining-stocks-continue-to-sink.html
I would like to focus in on the latest. I am forced to admit this is one that stretches the ability of those whose minds work in a logical manner to conceive of anyone falling for such a twisted example of convoluted and contradictory assertions.
I referenced this the other day in that post linked above but here it is in a nutshell.
The big gold ETF, GLD, is being drained of its gold inventory in order to meet insatiable demand coming out of the East and that this is BULLISH for the metal.
Let's start with a brief history of GLD, ACCORDING to some of the very same people promoting this latest theory.
Remember, in their mind, it is a contest between the PAPER gold markets here in the WEST and the REAL ( their word) gold market, which is in the far East.
Their claim is that were it not for manipulation of the gold price here in the West, that gold would be substantially higher because the true price would be set in the East by the physical market there. According to their new priests and prophets which lead this gold cult, once all of the gold is finished being drained from GLD, it will liberate the metal from the constraints being placed upon it in the West and the price will soar. Therefore, according to this view, FALLING GOLD INVENTORIES in GLD is ultimately WILDLY BULLISH!
( Please note that every single one of these theories is ALWAYS wildly bullish and PROOF POSITIVE that sharply higher gold prices are imminent).
Let's proceed to dismantle this latest theory by taking a trip back in time. When GLD was first introduced, a large number, if not an outright majority of those in the gold bug community swore up and down that its introduction was further evidence that the powers that be in the West were intent on siphoning true demand for gold AWAY from the physical gold market ( remember - in their mind that is the real gold market ) by creating another PAPER vehicle, just like the Comex. This paper vehicle would divert millions, tens of millions and hundreds of millions of dollars into an entity which could be manipulated by the "evil bullion bankers" and thus serve as a sort of Trojan Horse ( remember that phrase because it was extremely popular back then- Trojan Horse).
The big case against it however was its auditing process and specifically the point that the custodian for GLD was none other than HSBC, one of the noted "conspirators" in rigging the gold and silver prices (their claim - NOT mine). In other words, it was a case of the Fox guarding the chicken coop as far as they were concerned.
Additionally, they railed against the Authorized Participants of GLD - Bear, Stearns, Lehman, Citigroup, Merrill Lynch, Goldman Sachs, JP Morgan, UBS and Morgan Stanley as being unfit to be associated with anything the least bit related to gold, since they could not be trusted ( again - THEIR claim; NOT mine).
I distinctly recall the mockery and vociferous criticism raised by many of the ringleaders in the GIATMATT crowd when referencing the reported holdings of gold in the ETF. They screamed again and again that the auditing process was "a joke", and could not be trusted as they sarcastically put the following words in the mouths of those who managed the ETF:
" JUST TRUST US, the GOLD is THERE".
Do some of you remember this as well?
They cited the fact that the Trustee had no right to visit the premises of any subcustodian for the purposes of examining the Trust's gold as evidence that NO ONE COULD BELIEVE the REPORTED GOLD HOLDINGS in the ETF.
In other words, the GIAMATT crowd was reeking with disdain for any numbers coming out of GLD as unfit to be trusted.
Thus, they LOUDLY claimed that the gold was not there at all and that which was there was rehypothecated, subject to COUNTER-PARTY risk. This counter-party risk was something that they made a big deal about at that time.
Remember that other wild and popular claim that many of the gold bars were fake, being filled with tungsten?
All of their claims AGAINST GLD were to specifically DISCREDIT it as a viable gold investment vehicle that no one who really wanted to own gold should have anything to do with.
Here is the point - many of the same people who were mocking GLD back then and pooh-poohing the gold numbers it was reporting as its holdings, are NOW NEW BELIEVERS, NEW CONVERTS and have SUDDENLY had a REBIRTH of FAITH in the numbers coming out of GLD each day.
Now, some few years later, all of that Gold, Yes, the Gold that was NOT THERE in the ETF ( just trust us, the gold is there they said mockingly), the Gold that was rehypothecated, the Gold that had huge counter-party risk, and the Gold that was not really gold, but rather tungsten-filled bars is all being "RAIDED" and heading to the EAST to supply the insatiable demand from that corner of the globe.
I am not sure what world that many of my readers live in but in the world in which I live, this is what is referred to as hypocrisy. It is also one of the most egregious examples of illogic, inconsistently and blatant disregard for sound reason that I have ever seen in the arena of financial matters.
I guess these people who promote this sort of idiocy think we all have very short memories.
Then again, I suppose we should expect this sort of perverse reasoning when it comes to the gold cult. After all, this is just a sort of mirror image of the same "logic" that asserts that when gold experiences a sharp selloff at the Comex it is proof of "price suppression by the gold cartel banks". However when it experiences a sharp, blow your socks off sort of rally, that is normal, just, and righteous price action. Thus when it comes to the reported holdings of GLD, when they are rising, it is evidence that the numbers are bogus and should not be believed but when they are falling, it is incontrovertible evidence that the East is draining the ETF of all our gold.
Reductio ad absurdum perhaps???
To those readers who are actually serious-minded and are who are attempting to make fact-based investments or trades, rising GLD reported holdings are bullish for the gold price. Falling GLD reported holdings are bearish for the gold price. It really is that simple.
Don't fall for yet another hoax coming out of the GIAMATT cult. They see what they WANT TO SEE and not what is supported by the obvious facts. That is called "Observer-Expectancy Effect".
In closing here are two charts that illustrate perfectly what I stated in this last paragraph.
Here is the chart of GLD showing the rise and the fall in reported holdings.
And here is the gold chart:
Notice how closely the price of gold corresponds to the rise and fall of the reported holdings in GLD. Please note that I am NOT saying that there is a perfect correspondence in the daily price movement of gold in response to the reported holdings. What I am saying is that the general trend in the price of gold very closely mirrors what is happening in GLD holdings. When holdings rise, so too does the gold price. When holdings fall, so too does the gold price.
Keep that in mind when you come across yet another theory coming out of the GIAMATT crowd.
الجمعة، 24 أكتوبر 2014
Has the Bean Market Rally Finally Halted?
Beans have rallied an astonishing $0.98 since the first of this month. Why I say, 'astonishing' is because we are in the midst of harvesting a massive bean crop with the possibility of having a carryover nearly 4X as large as what we were left with for the 2013-2014 marketing year.
Part of what has contributed to this very unexpected ( because of the sheer size of the rally ) move higher has been that extremely tight carryover of which I just wrote. With the beans ( and the corn ) lagging the normal maturity levels somewhat, harvest has been running a bit behind the normal pace. ( Remember - I submit that the reason for the lag in maturity has been the near ideal finishing conditions for the plants, warmth and moisture, which has kept the plant pumping nutrients into the ears/pods instead of beginning the normal shutdown process. Translation - bigger yields!).
The slower pace of harvest means that some end users have been scrambling for supplies while they waited for the new crop to hit the pipeline. So we are faced with the anomaly of soaring bean prices over the last three weeks during a time frame in which we normally see prices working into a harvest low.
What has led this move higher has been the meal. For those who are new to grains, meal is made from crushing beans. The other by-product is soy oil.
There have been some reports coming out of the Eastern belt that processors are having trouble getting enough beans to crush. I do not know how reliable those reports are but let's just say that apparently the meal market believes it.
Look at this chart and you will see what I mean. Meal has rallied $65/ton since October 1! it is this strength which has driven the beans themselves higher. This is the normal for bean rallies - they are always led by meal.
However, this market may very well have run out of upside steam this week. It is still too premature to call an end to this rally but there are some signs that need to be heeded.
Look at where the rally has run. It stalled out just above the 50% Fibonacci retracement level which is near $353 before it closed BELOW that level today ( Friday). The market did however manage t to close over the 100 day moving average which is a big deal technically; however, the key for that next week will be whether or not it can sustain any upside follow through and remain ABOVE that 100 DMA. If not, there is a good chance that the meal has topped and with it, the beans.
By the way, every now and then we get the occasional "self proclaimed trading genius" who scoffs at those of us who employ Fibonacci numbers in our trading strategy. What I can say to them is that in all the years I have been trading, I find myself constantly amazed at how close these various levels are to reversal points that markets make. They are not fool-proof ( no trading method is ) but they are reliable enough that any professional trader ignores them at his or her own peril.
So has the bean market rally finally halted? We shall certainly see next week.
One other thing - the Cattle on Feed report confirms the tight supply of cattle that livestock traders are well acquainted with by now but it did show a bit larger number placed than at the same time last year. Still, the comp was already tight. That being said, while the cattle chart is one of the few charts in the entire commodity complex that has been very strong, the December is having trouble cracking the ceiling at $170. For long time cattle traders, some of us remember during the bust years seeing cattle prices at a THIRD of that. I am talking about a "5" handle in front of the cash cattle prices! That is to provide some perspective just how high these nose-bleed prices are in the cattle industry.
I am still keeping a close eye on this market for signs of a permanent top. I still think that cattle are living on borrowed time, giving the overall trend towards lower prices in the commodity sector, not to mention the increased competition from cheaper pork and chicken. The one thing that has kept beef elevated in my opinion, longer than I originally expected, has been the sharp - and I do mean SHARP, fall in gasoline prices. Cheaper gas leaves mom more money to buy high-priced beef but even cash-flushed moms have their limit.
So far, while this market has bent, it has yet to break. Big specs keep coming in and defending their long positions and have had the wind at their back as packers keep paying up for cattle to fill their slaughter schedules.
Lastly, hedge funds have been huge buyers in the corn of late and that is partly responsible for the $0.45 rally in corn since October 1. Based on today's COT report, hedge funds have covered, or bought back, 60,000 short positions since the start of the month. Yes, you read that correctly. We have seen a MASSIVE Short covering rally in the corn. I am also watching that market to see if it is running out of steam to the upside as well.
With wheat putting in an Downside Reversal Pattern today, it could be that the corn is ready to move lower into a final harvest low. Still, with all that has transpired in the grains these last couple of weeks, I am certainly treading lightly!
Here is the wheat chart. An interesting thing about the price action. I have noted that on the way up, $5.20 was a tough nut to crack but if cracked, wheat could run to $5.40. Guess what, it ran through $5.20 and managed to close above that level yesterday for the first time, then promptly ran to $5.39 1/4 before COLLAPSING BACK DOWN through both levels today! WOW...
Part of what has contributed to this very unexpected ( because of the sheer size of the rally ) move higher has been that extremely tight carryover of which I just wrote. With the beans ( and the corn ) lagging the normal maturity levels somewhat, harvest has been running a bit behind the normal pace. ( Remember - I submit that the reason for the lag in maturity has been the near ideal finishing conditions for the plants, warmth and moisture, which has kept the plant pumping nutrients into the ears/pods instead of beginning the normal shutdown process. Translation - bigger yields!).
The slower pace of harvest means that some end users have been scrambling for supplies while they waited for the new crop to hit the pipeline. So we are faced with the anomaly of soaring bean prices over the last three weeks during a time frame in which we normally see prices working into a harvest low.
What has led this move higher has been the meal. For those who are new to grains, meal is made from crushing beans. The other by-product is soy oil.
There have been some reports coming out of the Eastern belt that processors are having trouble getting enough beans to crush. I do not know how reliable those reports are but let's just say that apparently the meal market believes it.
Look at this chart and you will see what I mean. Meal has rallied $65/ton since October 1! it is this strength which has driven the beans themselves higher. This is the normal for bean rallies - they are always led by meal.
However, this market may very well have run out of upside steam this week. It is still too premature to call an end to this rally but there are some signs that need to be heeded.
Look at where the rally has run. It stalled out just above the 50% Fibonacci retracement level which is near $353 before it closed BELOW that level today ( Friday). The market did however manage t to close over the 100 day moving average which is a big deal technically; however, the key for that next week will be whether or not it can sustain any upside follow through and remain ABOVE that 100 DMA. If not, there is a good chance that the meal has topped and with it, the beans.
By the way, every now and then we get the occasional "self proclaimed trading genius" who scoffs at those of us who employ Fibonacci numbers in our trading strategy. What I can say to them is that in all the years I have been trading, I find myself constantly amazed at how close these various levels are to reversal points that markets make. They are not fool-proof ( no trading method is ) but they are reliable enough that any professional trader ignores them at his or her own peril.
So has the bean market rally finally halted? We shall certainly see next week.
One other thing - the Cattle on Feed report confirms the tight supply of cattle that livestock traders are well acquainted with by now but it did show a bit larger number placed than at the same time last year. Still, the comp was already tight. That being said, while the cattle chart is one of the few charts in the entire commodity complex that has been very strong, the December is having trouble cracking the ceiling at $170. For long time cattle traders, some of us remember during the bust years seeing cattle prices at a THIRD of that. I am talking about a "5" handle in front of the cash cattle prices! That is to provide some perspective just how high these nose-bleed prices are in the cattle industry.
I am still keeping a close eye on this market for signs of a permanent top. I still think that cattle are living on borrowed time, giving the overall trend towards lower prices in the commodity sector, not to mention the increased competition from cheaper pork and chicken. The one thing that has kept beef elevated in my opinion, longer than I originally expected, has been the sharp - and I do mean SHARP, fall in gasoline prices. Cheaper gas leaves mom more money to buy high-priced beef but even cash-flushed moms have their limit.
So far, while this market has bent, it has yet to break. Big specs keep coming in and defending their long positions and have had the wind at their back as packers keep paying up for cattle to fill their slaughter schedules.
Lastly, hedge funds have been huge buyers in the corn of late and that is partly responsible for the $0.45 rally in corn since October 1. Based on today's COT report, hedge funds have covered, or bought back, 60,000 short positions since the start of the month. Yes, you read that correctly. We have seen a MASSIVE Short covering rally in the corn. I am also watching that market to see if it is running out of steam to the upside as well.
With wheat putting in an Downside Reversal Pattern today, it could be that the corn is ready to move lower into a final harvest low. Still, with all that has transpired in the grains these last couple of weeks, I am certainly treading lightly!
Here is the wheat chart. An interesting thing about the price action. I have noted that on the way up, $5.20 was a tough nut to crack but if cracked, wheat could run to $5.40. Guess what, it ran through $5.20 and managed to close above that level yesterday for the first time, then promptly ran to $5.39 1/4 before COLLAPSING BACK DOWN through both levels today! WOW...
With all the goofy money flows this week and huge spread positions being piled on and taken off, I am a bit leery about prognosticating anything about the grains with much certainty right now but this is usually one of the more reliable technical signals. Then again, Wednesday's sell signal in the beans and in the meal immediately was negated on Thursday so there ya go! The motto is: "NOTHING IS EVER SURE IN COMMODITIES - NOTHING!". Just about the time you think you've got things all figured out, a steamroller flattens you and leaves you wondering what the hell just happened to you!
Enjoy the weekend - the drill starts over again Sunday evening!
الاشتراك في:
الرسائل (Atom)