Unwinding Spreads and Weather Bring Volatility
May 28, 2013
Money-flow in the grain and soy markets continues to produce extreme volatility. With "month-end" approaching this Friday, I suspect even more extreme swings, especially in the spread markets. Remember, many of the funds will start rolling out of the JUL13 contracts during the next 2-3 week window. With many looking to start rolling to new-crop contracts, traditional logic often associated with "spread" trading is out the window. Moral of the story, spreads could end up being more dangerous than flat-price during the next 10-15 days of trading. Proceed with extreme caution! We are also continuing to see more money-flowing out of commodities and into US equities, possibly more signs of longer-term commodity headwinds. Weather bulls here in the US continue to talk about an extended rainfall forecast that will further delay planting. With just 50% of the soybean crop planted (my guess) the trade seems more concerned than ever about the optimistic record USDA yield estimate and the total number of acres that will ultimately get in the ground. On a global scales, weather seems to be less of a concern as rains across the east coast of Australia, parts of the Black Sea region and China have helped ease supply concerns. Get my daily report with more detailed information by clicking the link below.