Grain Markets Held Hostage by Europe
Jun 04, 2012
Agricultural markets will remain hostage to the "headlines" coming out of Europe. We may get a chance to slightly catch our breath this week, but continuing problems in Greece and Spain will be carefully monitored and keep everyone on the edge of their seat. German Chancellor Angela Merkel is supposedly meeting with European Commission President Jose Manuel Barroso in Berlin today to discuss additional options, but with Merkel again ruling out any type of "joint debt sharing" or "German-backed euro bond" there may be little progress or solutions for the deepening problems. On Thursday US Fed Chairman Ben Bernanke will be speaking before the "Joint Economic Committee" on the economic outlook and monetary policy of the US. As you can imagine the market will be extremely eager to see if Bernanke gives even a hint of QE3 in his testimony. There are many analyst who believe the recent wave of poor economic numbers should be more than enough to justify and prompt another round of quantitative easing. If the market senses this is true we could see a definite rebound in commodity prices across the board, otherwise traders will be left trying to plot their course around several potential major road barriers that lie ahead.
Traders will certainly be keeping one eye on the road immediately in front of them, but rest assured they are becoming extremely nervous about the obstacles they see coming around the next corner on their GPS monitors. Starting next Tuesday (June 12th) we have the June USDA Crop Production Report (WASDE). Then just a few days later on June 17th we have the Greeks voting in a second parliamentary election after an earlier election in May failed to produce a coalition government. The fear this time around is if the right candidates are elected Greece could end up pulling out of the European Union and the whole house of cards will come tumbling down. Immediately following the Greek elections Iran will be wrapping up extended negotiations and talks with major world leaders about ending their nuclear weapon developments. If talks go well there is a strong chance crude oil could fall well below $80 per barrel. What happens to corn or ethanol if crude oil prices continue to slide? There is no way corn rallies if crude oil breaks another $10 to $20 per barrel. Then on June 19th and 20th we have the two-day Fed meeting here in the US. This is when the "bulls" are expecting the US Fed to ride in on their white horses and save the day once again by coming up with yet another "bailout" plan of some sort that drive the US deeper into debt (ultimately weakening the US dollar and pushing commodity prices higher). My personal concern is that with Europe still teetering on the brink of a complete melt-down the Fed will NOT want to waste their few remaining bullets getting out in front of this potential landslide. I am thinking their help may be more needed if and when Europe really takes the tumble, which is looking more and more like it will be inevitable. Moral of the story, "aim low, they might be ridding Shetlands…" Anything could be possible in the next two to three weeks. It wouldn't surprise me in the least bit to see a major melt-down or a last second "Hail-Mary" completion that total turns the game around. It is ALL coming to a head...
We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets. Just click here - Van Trump Report