AG TIME - time for a long term thinking by John Walsh
Apr 26, 2018
The beans and meal rallied early. There were a number of reasons abound. There was an accident at the rosario port that could limit meal exports. The EU and CHINA are on holiday Friday through Monday so there was a need for coverage today. There are more but those two will suffice. The beans were clearly the follower on the day. As meal backed off so too did beans. The oil is just plain in the doldrums and can barely mount any upside. These rallies in beans in my humble opinion present an opportunity to the producer that should be taken to heart. These are good prices. Please consider the following and lets take a longer term approach. The Chinese economy has had an incredible run over the last decade. Fifteen years really. In this time, an incredible amount of debt in China has been built up. The current Chinese debt to GDP ratio stands at a whopping 360%. The US holds many cards. The current potential trade war really is not the problem. The overall Chinese economic outlook is. It is not sustainable. The ability to grow demand in an economic downturn is difficult, if not impossible. The talk of China slowing hog production has less to do with the trade war rhetoric, and more to do with a general slowdown. For the global production to need a 5%-10% growth in demand from China, year after year, to not grow carry overs is foolish. At present the Chinese have taken 20% less beans out of the US yr over yr. Again, why? Too much. The reserves in China are huge. There is now talk they will release some. In addition, there was talk today of 6-8 cargoes cancelled. I may be very wrong indeed, but there are many signs here that this long term bull may be coming to an end. When was the last bearish report you read? Perhaps this one. Perhaps I am 100% wrong. If I am correct we are seeing significant highs. 1,2,3 years worth of profit in front of the producer at current price levels. All I suggest is lock in a guaranteed part of the crop as long as you can. Speculate with a smaller percentage than normal. If these are highs, the market will look much different 6-12 months down the road.
The corn market is where some opportunity for further gains is still present, in my opinion. The global numbers are in decline. The Brazilian crop too is in decline. The US will benefit from both. The question now is what will the acreage tell us. Further declines will put the US carry in a potentially friendly scenario. Take notice. NOT A RUNAWAY BULL. But, a market that may need to move to a higher price level. The recent lows in corn may prove to be tough to take out. The market will need to add risk premium if the weather turns wet. The present forecast is not overly threatening. Will the Delta lose more feed grain acres to beans ? Stay tuned, an important piece of the puzzle. Another leg up in the 2018 and 2019 crops present an opportunity to add to hedges 430 - 440 may be in the cards. Patience now. There are many ways to play. Limit the downside, but leave some upside open.
The Corn has gained on beans of late, this is a trend that may continue and represent a real opportunity. Quantify the risk. To discuss other long term opportunities in the market 800 993 5449 or firstname.lastname@example.org. We attempt to identify long term moves in the market. It is our belief that is where the opportunity exists in the marketplace.
"ONLY THOSE WHO WILL RISK GOING TOO FAR CAN POSSIBLY FIND OUT HOW FAR IT IS POSSIBLE TO GO"
John Walsh, President, Walsh Trading, Inc.