A Waiting Game

Published on: 13:27PM Jul 24, 2010
 Oats: Not much change in oats this week, either in price or in relationships between commercials, who are significantly short, and funds + specs, who total an equal number of longs. Volume has been low.

Beans: The commercials still seem intent on swing trading beans, having gotten short last week and shorter this week. The funds went from long to longer, and the small specs got a little less short. The price structure does look like we will see some downwards action next week. Volume has been low, implying the players are waiting.

Corn: Thoroughly rotten was this week for corn bulls. As often happens, when major press stories break, prices do the opposite of what the public thinks. Last weekend we saw headlines in most of the press about the heat wave killing grain in the Midwest. What a great time to nail a few suckers! So the commercials and, I dare say, the pit traders, sold to the amateurs who bought the headlines. Now prices need to go down to extract profits from the newbies, then they can go back up. Commercials are short for the first time since January, and the funds got longer. My guess is price will go down at least to 375, but I expect 369-370 will hold, although you never know for sure.

Wheat: Commercials sold off some of their longs, while funds are now long for the first time since June of 08. Wheat has the same price structure as beans, both looking like they would like to come down a bit.

Heat domes in Europe and especially Russia, Georgia and the Ukraine are killing grains pretty thoroughly. Chinese crops aren’t doing all that well, though the government is loathe to admit just how badly. One wonders what the implications for crops are should the Three Gorges damn reach capacity (it is now at about 90%) and need to open sluiceways, now releasing 140% of the water of the 1998 floods, even further. China’s three main crops are, in order, rice, wheat and corn. Even though a poor crop year in 2010 will not send 2010 crop prices to the moon, they will deplete reserves to the critical point. 2011 may be nicely profitable for American farmers.