"What A Long Strange Trip It Has Been..."
Jun 24, 2011
"What A Long Strange Trip It Has Been..." famous words from my late friend Jerry Garcia of the "Greatful Dead." I played golf with Jerry on numerous occasions, and I am telling you now, he would have had a much more colorful vocabulary in trying to describe the recent price movements we have witnessed in the grain markets as of late. Obviously the "outsides" have had the big boys reeling, and yesterday's announcement to drop some 60 million barrels of crude from strategic reserves on the world market sent the long energy bulls scrambling for cover. This in turn lead to massive liquidation across the board as a "risk-off" alert was sounded. Closer to home, the wheat, corn and cattle markets came soaring back. Wheat in Europe seems to have found some stabilization, and Asian demand for US meat is starting create a buzz. Talks also indicating corn was able to find some interest on the break from the ethanol plants and livestock end-users, while some additional whispers were made that China may have in fact have made some purchases in both the old and new crop cash markets, and may have even jumped in the futures market. There is a certain fear in the air that if China were to start buying in the futures market, we could see some some serious volatility in the coming weeks. Look at it this way, you have several commercials still in the July contract trying to wait it out and make the roll to Sept at even money or better. If some serious longs get into the July contract, and are looking to take delivery, this could force the shorts to come up with the bushels. This is were the problem might could occur, as some will find it next to impossible to originate the corn. All it will take is a big enough player who is serious enough to call their "bluff," and the shorts could quickly be forced to throw in the towel. I will guarantee you China is a big enough player. Who knows is if any of this has or will take place, but it is certainly something to think about as we move forward. Longs taking delivery of the July corn can not be ruled out with prices tumbling and the basis remaining this strong.
In regards to the Outside Markets, there was some sense of relief when newswires announced EU & IMF officials had approved an austerity deal for Greece. Be very cautious buying into this rhetoric or reading into it the wrong way. To the best of my knowledge, all that has happened, are measures proposed by Greek Finance Minister Evangelos Venizelos to complete a $170 billion austerity package were approved or endorsed by officials from the European Union and International Monetary Fund. Big deal, this really means nothing! The whole package still faces a critical vote next week in the Greek parliament, the approval yesterday was merely a condition or hurdle they needed to overcome before they could even put it to a vote. There are huge spending cuts and tax raises that need to be approved by the Greeks next week before anything else can happen. Remember, they barely passed the simple vote of "confidence" this week 155-143, this is not a done deal! The bottom line is simple, if they don't get another line of credit Greece will default immediately, they need the funds ASAP to cover some 6.6 billion in euros that are maturing on bonds in August. If they do get the line of credit needed most are betting they simply are delaying the inevitable, and default down the road. Can You Say Dead-Man-Walking. the "outsides" are obviously still reeling from a very rough week and currently sit unchanged on the day. *Remember folks, next Thursday we have the USDA Planted Acres Report coming out. It is shaping up to be one of the most important reports of the year. To know my thoughts on what Managed Money and the Funds will be watching for and how it will impact prices, make sure you sign up for my FREE report a couple days ahead of time so that you can catch the lead up to the big report!
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