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RSS By: Kevin Van Trump, AgWeb.com

Kevin Van Trump has over 20 years of experience in the grain and livestock industry.

Could Europe Eventually Damper the Grain Rally?

Sep 06, 2012

There is no doubt the next 60 days in Europe could end up being the most decisive of the entire debt-crisis. Plain and simple there are several pivotal meetings on the agenda that could rock the "outside" markets if they don't go as planned. Lets also not forget we are only about 45 trading days away form the upcoming "US Presidential Election." Needless to say there will be a lot of "meat" on the plate to digest the next several weeks. To say the least I am concerned about the "outside" markets. Keep in mind, as of late the European debt story had been moved to the back burner. My fear now is the media may start leading this story once again as the hype surrounding the US drought comes to an end and the European leaders start to return form their summer vacation. Lets also keep in mind as the US election approaches and the B.S. starts to fly as both candidates tell us their plan for balancing the budget, creating more jobs, repairing the US housing market, etc...we may actually see more optimism and hope, therefore causing some additional strength and premium to be added to the US dollar. Remember, if Europe runs into more problems and the US dollar strengthens it will prompt more of a "risk-OFF" than "risk-on" attitude amongst the funds. Below are a few of the bigger government events and highlights we need to keep our eye's on the next couple of weeks: 

 
Even though the outside winds are at our back this morning, I question whether or not we can hold the rallies. The macro markets were hoping to hear some talk from Bernanke at Jackson Hole in regards to QE3...and it didn't happen. The markets were looking for a rate cut by the ECB this morning...and it didn't happen. Remember, talk is cheap. My guess is once the market stop rising on all of the "hot air" reality will once again set in and our hot air ballon ride could come to an end. Lets just hope it doesn't come crashing down! 
 
Do you realize for the past three months we really haven't encountered any outside macro market headwinds. The same exact length of time as the recent bull run in soybeans. Below are a few interesting facts my research team dug up. 
  • NOV12 soybeans posted a low of around $12.45 on June 1st, since then the market has rallied to yesterday's high of $17.89.
  • DEC12 corn posted a low of $5.06 on June 15th, since then the contract has rallied to an August 10th high of $8.49 per bushel. 
  • Crude Oil put in a low of around $78 in mid-June and has since rallied to just over $98.00.   
  • The S&P500 posted a low of 1,255.50 on June 4th, since then the US stock index has rallied to over 1,400. 
  • Gold has traded form a low of $1,548 an ounce to almost $1,700 yesterday. 
  • The US dollar was trading at a high of 84.00 on June 1st and has since traded sideways to lower, yesterday trading down to almost 81.00.
 
My point is we have not faced any real stiff outside winds since this rally began. If the funds get spooked by a macro market aberration I am afraid we could see some serious blood shed in the commodity sector. I don't know when or how it will occur, I just know it seems eerily quiet for there to be so many unanswered questions still circulating and so many economic problems unsolved. Below are a few key events during the next few days. 
 
Fri 9/7 – US monthly jobs report for August. could influence QE3.
9/7 - Informa releases latest crop data estimates.
Wed 9/12 - September USDA crop report. Expected to be volatile. 
Thu 9/13 - Fed Meeting. Will Bernanke and crew announce QE3?  
Fri 9/14 - Eurozone Finance Minister Meeting. Should give us new direction.
 

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