Speculator Driven Markets

Published on: 09:16AM Jul 16, 2009
At the outset let it be known that Farmers and Livestock Producers need each other to survive. I have been farming for over 40 years, understand this concept and therefore want the livestock industry to continue to be a viable and successful consumer of Agriculture Production. And I understand that the last three years have been very difficult for them. Perhaps though, a little humor might help us to get through this very challenging year. Enter the CFTC who just recently have initiated new guidelines in hopes of curtailing the violent swings becoming more prevalent in the trading pits as of late which is exactly why the Bernard Madoff wannabees have been focusing on the Commodities in the first place. These “Funds” however don’t want to carry this charade quite as far as BM did- at least not to the point of being discovered and perhaps suffering the same end result. But as everyone knows, the most money can be accumulated in the shortest amount of times by creating mentality-both real and unreal- to support these unjustifiable swings. But one does not have to be a rocket scientist to know that when very large pools of money are thrown at any commodity the source of that pool of money can make the market move in whatever direction desired. Is anybody laughing yet? In my opinion, speculators in every segment of our economy put the icing on the cake in the debacle that we all are enjoying now and for the foreseeable future. OK, so now introduce the computer trading capability. Is it totally inconceivable that a Bazillion of these computer generated trades each slightly modified so as not to raise suspicion but all designed to support a market moving in the same general direction gathering momentum as each keys on the previous similar trade? The answer, of course, should be obvious to all if they are paying attention. And then I think we have all recently witnessed regulatory bodies in the government who either chose not to do the job they were employed to do or chose to just overlook certain issues no matter how extreme. That certainly sounds like the responsibility of the CFTC. And correct me if I’m wrong, but I would find it hard to believe that these computer generated transactions are all commission free. But if not then, the CBOT would be very busy monitoring the flow of revenue into their accounts as the volume of transactions as of last year surpassed all previous records. And was this the real reason why the whole concept of options with the related charges introduced in the first place under the guise of “Risk Management” for the producers?

And then fast forward to the USDA who last fall predicted that the Soybean crop from the Southern hemisphere to be somewhere in the neighborhood of 47MMT which consequently influenced the cash Soybean prices in this country to descend from the lofty $13-14/Bu to $9.00/Bu and deteriorating, only to find that the 47MMT shrank to 30MMT before being totally forgotten about. And obviously given the amount of Soybeans that the Chinese purchased from this country, South America was no longer even a factor for the marketing year. Now comes the Planting Intentions Report at the end of March this year when miraculously 7M acres planted the previous year just totally disappear only to surface recently when once again the commodity prices were edging too high. Everyone knows the results of that report which was compiled even before this years’ production acres were even certified. What an accomplishment! I guess that was possible because everyone should also know that today’s “High Tech” Corn is capable of producing 200-250 BPA planted up to 6 weeks after Optimum Planting dates and in some cases totally submerged in water for days/weeks at a time, and even producing equally as well while still in the bag. So I guess we should not really be surprised at what is coming next besides Frost-Oh my! As for me, I don’t know whether to laugh or cry for all Ranchers and Farmers and eventually consumers alike.