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RSS By: Bob Utterback, Farm Journal

Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.

Boom-and-Bust Economic Cycle Looms

Oct 24, 2011

Why is there so much gloom and doom in the grain marketplace?

 
In two words, it’s the outside markets. The continued debt crisis in Europe, anemic job growth in U.S. and the resulting slowdown in China has many worried about future demand. Essentially, we are entering the dark side of the boom-and-bust economic cycle.
 
We are now in a down­ward spiral of slow economic growth, along with high private and governmental debt expo­sure that saps consumer and government disposable spend­ing, resulting in slow job growth that leads to less tax revenue.
 
Talk of a double-dip recession is giving way to concern that we could actually be looking at something much worse—the big “D.” The end result is fear, which is becom­ing a force in the market whose effects are difficult to predict.
 
Subsequently, we are now in a time period when the supply and funda­mentals for corn and soybeans are still important but will indicate only about 40% of the price direction.
 
I’m inclined to believe that for the next six months, the pink elephant in the corner will be the direction of the outside mar­kets. If the Dow makes new lows, the funds and professional speculators will be forced to move aggressively to the sidelines.
 
As a result, at least in the short term, it could be extremely painful for a net long. Long-term, we should get values down to levels where demand will be stimulated and production discouraged at a time when we actu­ally need the opposite.
 
The upshot is that the lower the market goes in the next three months, the more likely the chance that demand will stabilize and then increase while supply is still tight, leading to a dangerous upside price event.
 
 

 

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2011.

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COMMENTS (1 Comments)

PullMyFinger - Chappell, NE
Heavens, we SURE wouldn't want one of those DANGEROUS upside price events!!!! Might be able to buy a tank of diesel fuel.
10:46 PM Oct 25th
 

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