Now Entering the Weather Markets
Apr 05, 2011
Let the weather markets begin. As I mentioned a few days back, the trade will become "extremely" volatile the next several weeks as traders inject and take away weather premium at the blink of an eye. The US crop is obviously being watched by the entire world, any signs of issues will not be taken lightly. If you are an end user that still needs coverage or a speculator looking to play the game from the long side, I would suggest patiently waiting to secure the breaks. I would anticipate some nice set-backs along the road to "new" all-time highs as traders continue to bank profits on the rallies and re-own on the breaks. I wouldn't be afraid to join the party at these levels, I think we still have some nice upside potential. As I have mentioned all along, buy the dips...not the rips! Since the last Thursday’s Report corn and wheat have obviously led the way trading off the low ending stocks and midwest drought issues respectively. Soybeans have been a different issue with global demand slowing for the time being. I hope you are signed up for the reports as I have written in greater detail on this in the last two days. I will say that I continue to stay long-term bullish, but it looks as if some supplies will have to be worked through till we see the market focus much on supply issues in beans.
Fear of La Nina Still Lingering
I am not sure if you caught it on the wire services Friday, but the British Weather Services and Telvent DTN are predicting that dry weather related to this years La Nina weather patterns may hang around for a couple of more months both here in the US and in China. Some of the big boys are saying this could put a floor in wheat price until the end of June. With this said, those of you who are still holding bullish wheat positions or looking to make additional wheat sales may want to hang on a little longer. I have recently scaled out of a large portion of my bullish wheat positions maybe mistakenly so. If we get a push lower I will certainly consider reestablishing. I am still long, but just have very little on. You don't need me to tell you that if dry conditions persist for a couple of more months wheat prices will skyrocket. As you know I hate playing the weather game, unfortunately that is the position we are in. With China's 115 million tons on the line and a significant portion of the US wheat crop in poor condition, you can guarantee the trade is concerned. The cost of seeing this thing play itself out might be worth price of admission. Understand going in this is truly a weather play. If it rains, kiss the premium goodbye. If it stays dry you might just hit a home run.
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