Johnston Pro Farmer Senior Markets Editor
as of 7:00 a.m. CT
Hedge funds are 'wrong
side' of market... Since riding the coattails on the rise to record
commodity prices, commodity hedge fund managers are faced with a completely different
set of circumstances. This week Ospraie Management disclosed it lost about $3
billion of the roughly $7 billion it manages due to increased volatility in energy,
mining and natural resources stocks.
But they aren't the only
hedge fund in trouble. According to data from Hedge Fund Research (HRF), as many
at 679 hedge funds may be forced into liquidation this year -- a failure of about
So what could this mean to the commodity markets?
The answer isn't easy, because commodity markets can make an about-face at any
moment in response to market fundamentals (supply or demand disruptions, for example).
But it does suggest momentum has turned. What was once thought of as "easy
money" is now becoming more difficult. If hedge fund money continues to come
out of commodities, it takes out a major source of investment in the long side
of these markets.
Keep your comments coming. Always good to
have conversation with you and input on what you'd like to talk about. E-mail
your comments/question to me by clicking here. Please include your location.
Opening calls. These calls originate
more than three hours before the open -- use caution, things change::
Corn: 12 to 14 cents lower. Futures were sharply lower overnight on
spillover from strength in the dollar. Futures posted a choppy day of trade and
didn't stray too far from unchanged yesterday. All week, futures have hovered
near the middle of the August trading range, signaling the market has developed
a "wait-and-see" attitude ahead of the September Crop Production Report, which
will be released next Friday.
Soybeans: 30 to 37 cents lower. Futures
were sharply lower overnight on spillover pressure from weakness in the crude
oil market. Futures posted a low-range close yesterday, finishing 16 to 17 cents
lower. Pressure yesterday came from outside markets, as crude oil was lower on
liquidation pressure while the dollar posted strong gains on concerns the global
economy is weakening.
Wheat: 23 to 26 cents higher. Futures
were lower overnight on spillover from neighboring pits and outside markets. Chicago
wheat closed slightly higher yesterday, seeing a narrowly traded session. Upside
potential was limited by strength in the dollar, which was supported by concerns
about further global economic slowdowns. Ideas the wheat market has overdone the
downside have resulted in some short-covering support as traders reevaluate positions.
Cash cattle expectations:
Nebraska trades lower. Cash cattle trade got underway Thursday afternoon
in Nebraska at $1 to $2 lower prices than the previous week. No cash sales were
reported in Kansas and Texas as of late afternoon. Despite the lower Nebraska
prices, cash sources continue to expect steady to possibly $1 higher trade in
the $99 to $100 range in Kansas and Texas.
Mixed. Another choppy day of trade is possible as traders wait on active cash
trade to develop. December live cattle traded on both sides of unchanged before
closing 17 cents lower -- near opening levels. In early trade, futures violated
support to post a new-for-the-move low. Support lies at the late- February/early
Mary high of $104.90.
hog expectations: Steady, mixed undertones. The pork cutout value
was down another 72 cents Thursday to continue the heavy price pressure seen over
the past couple of weeks. If there's a silver lining in this price plunge it's
that product movement has turned strong, which suggests pork prices may have dipped
far enough where value buying is starting to be seen. But concerns with export
demand continue to hang over the market.
Futures call: Mixed.
Futures are called mixed as traders continue to reevaluate positions. Nearbys
have sharply reduced the discount they hold to the cash index recently. October
hogs hold around a $5.40 discount to the index, which is a huge improvement from
the $15-plus discount the contract held in late August. December hogs did some
more technical damage on yesterday's slip through support to post a fresh weekly
low. The contract is nearing support at the March low of $68.20.