Posted by: usset001 | February 17, 2011

The bull market in grains

March'11 Corn Futures

Someone asked a straightforward question the other day. I thought I would share my answer.

Question: What is your take on the current market?

Answer: Here’s my take – this is a raging bull market that cuts a swath through all commodities, and not just corn and soybeans. Look at cotton and sugar and copper (and on and on).

In my opinion (and a word of caution here – I’ve been wrong before), the bulls are in complete control until one of two things (or both) occurs…

1. The market must show signs of rationing demand. Right now, I’m not seeing those signs. Soybean exports continue apace and the latest WASDE report was the fourth time since last May that USDA has RAISED their projection of corn used in ethanol production in the current crop year. I think the argument can be made that corn prices are currently driven by oil markets.

2. On the supply side of the equation, the markets are in a Missouri state of mind. Missouri is the “Show Me” state, and the bulls are pointing to exceedingly tight carryouts and asking the bears to “show me” – show me that the next crop will be large enough to meet the needs of domestic and export markets. It is difficult to show me when we are two months away from planting and even further away from any sense of relief that comes with a large crop developing in a normal manner.

Bull markets are volatile, exhilarating and sometimes exhausting. Me? I have my ear to the ground, listening for signs of slowing demand. We’re not there yet.




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