The markets are in turmoil!
May 06, 2010
The market is in real turmoil right now. The concern over Europe sliding into deflation is causing the stock market and all related investments to question what the future is going to look like. In many ways, I have to suggest the emotions are very close to what was happening in the U.S. last September when our economy was under pressure.
The simple fact is the many countries have been living beyond their means and the bill has come due. I hope all U.S. taxpayers realize that this is what is in store for the U.S. economy if the current administration policy continues. You cannot tax and spend your self into prosperity!
In regards to the grains, they had a rather volatile day. The corn market started out weak in sympathy with the stronger dollar and weaker oil market and then roared back on good export and talk that the oil crisis in the gulf could eventually help increase the demand for ethanol production. The gains however could not be held and prices closed under pressure.
I am concerned the corn market is not breaking more than it has already. It seems to have a strong under tone and is just waiting for an excuse to go higher. I am recommending all hedgers be cautious right now from Memorial Day weekend into July. You need to be deciding now what you are going to do if December 2010 corn closes above $3.96 and $4.05. While this may sound bullish, I have to suggest long term I still believe the odds are better than 60/40 that December corn will move to lower levels in August and September and producers will be looking at close to zero to $50/acre loss if they are not careful.
The real big story however has been the bean market. The markets have been keeping the beans above water for some time now but I have been of the opinion it would only be a matter of time before the bottom fell out. Today could be that event.
First, the Brazil crop estimates have been increased to 67.8 million metric ton from 67.39 million metric ton. Essentially, the Brazilians are going to have a great crop and the Chinese are going to have all they need from them for the next few months. Soybeans closed under pressure down over 22 cents. With the technical double tops in the beans, I have to suggest the trend is now down until we get some type of solid weather event concern. Granted some advisors are talking about a late summer dry weather event but that is a long way away and putting weather premium into the market is not needed.
My position is to maintain all hedges and not look to defend until we have a solid close above the recent double top price action.
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