My "Big Picture" Thoughts on the Grains
May 16, 2011
I wanted to catch up with the folks and share a piece of this morning's report. If you aren't receiving the full report, click the link below and get it for free. If there's anytime that you need to be closely watching or have someone on your team closely watching the markets for you, it's now.
from this morning's report: Just in case you didn't believe me when I told you a few weeks back that the larger hedge funds and a big portion of the managed money would start cutting their bullish bets on the commodity markets, the CFTC has now confirmed my thoughts by releasing data that shows over $17 billion in positions have been liquidated as of late. Reuters is going as far as to say the the so-called "managed money" funds have cut their overall net long holdings in the major US futures markets by all most 250,000 contracts or close to 15% in just the past couple of weeks. Supposedly the value of total fund holdings has now fallen to around $116 billion. If this number is correct it would indicate that less than 1/3 of the total amount of money being held by the funds are actually at risk or invested in the commodity markets at this time. Don't think for a second this liquidation has been exclusive to Silver and Crude Oil as they have been garnering most of the attention in the media. The Chicago corn contract has seen the bottom fall out of "Open Interest" the past few weeks. It is estimated that bullish fund managers have taken over $1 billion of long positions out of the corn market reducing their bullish stance closer to levels seen during the middle of last year. The problem is they are still in a huge number of long positions, and if the "outsides" continue to crumble you can almost bet we will see even more liquidation. The good news is with only a 1/3 of their resources invested they certainly have plenty of available funds to pour back into these markets when they believe the timing is right. Now it becomes our job to figure out when the bleeding will stop and when the "money-flow" will turn back around.
Fundamentally, with continued wet weather forecast for portions of the Eastern Corn Belt and areas to the North who are all ready way behind schedule I feel you have to continue exclusively play the corn market from the bullish side. Factor in the number of acres being lost to flooded areas in the Delta and Southern regions and you would think it is a no-brainer. The only problem is the funds are still backing out of some positions in the "outside" markets and pressuring every rally. With Crude Oil down again today I doubt the results will be much different. We need the "outside" to stabilize in order to gain extended traction. We should come out of the gates higher, but I anticipate our fate will continue to ride on the ultimate direction of crude oil, and the US Dollar.
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