USDA’s Supply & Demand Report is out and the bulls are waging war on the markets. Buying is at a fever pitch, we all know that beans and corns are going to the moon. We know this time is different and nothing could possible go wrong. This is a time for free money all you have to do is buy.
Of course maybe something could go wrong and if you study history you know that the current pace is unsustainable. It was just two years ago hog futures were at $133 before heading back to $50 -- we were sure that hogs could never go down. Less than two years ago feeder cattle futures were at $245 and greedy buyers knew the free money would never end and here we are at $145.
The bulls are out making sure we know that this time is different, there are shortages, the weather -- you name it there are reasons the markets can never go down again. Just four years ago beans were at $18.00 on their way to a million, nothing could derail that bull market. Like a bad dream markets quickly fell apart and beans collapsed. Corn and wheat also have lost more than 50% of their value; add oil to the mix which had an 80% decline.
I am not predicting the top of the market, certainly there is no telling how high they can go from here. However I’m warning farmers and producers that greed will gut you and if you are not protecting your profits here you are falling into the trap of traders and speculators and will be wondering what truck just ran you over when this market falls.
Look back in history and realize markets are markets and will price themselves correctly over time. When the irrational exuberance is gone, traders will realize that they were trapped again and this time is not different. Take advantage of the moment and lock in profits while leaving room for this move to continue and always remember this will end the same way as every other big market -- with a thud.
This time is NOT different.
Keep those stops tight!
The views, opinions and positions expressed by the author are theirs alone and do not necessarily reflect the views, opinions or positions of Pro Farmer.
