Market Trends…..
Corn is also stuck in a trading range. Could test 6.50 in the July but Dec should have problems taking
out the 5.25 to 5.35 level. Farmers should use this rally into that area to extend coverage. Bull spreads
look to still have some value here with basis levels bid well over Jly delivery equivalents ---it is just that
deliveries are a long way off and a lot of changes could take place by then. This market does not have
much of any weather premium built into current prices. The long term temps maps for warmer temps
across the south could have been a warning shot?
Beans got excited because of 1.0 MMT of bean sales in old crop between daily and weekly sales.
Suspect commercial were well aware of this prior to the reports and already positioned in the spreads.
Basis levels popped hard yesterday but were unable to keep the gains today? Several have asked me
why the bean basis is not stronger with all the biz taking place. The inverse has a lot to do with that. It is
very hard for a crusher or exporter to hold inventory of more than 30 to 45 days into this strong inverse
--- they have to be able to use up that inventory prior to the inverse melting away. Arg crop continues
to shrink and harvest will be close to done by end May. The export trade is pretty well done and most of
remaining stocks will be retained to crush there. Meal basis is way too strong at 18 over making US
meal at 22 over look competitive. This means US bean and meal sales will continue to be strong. Arg
soyoil basis also firmed today making US soyoil look like a bargain also.
July beans should be supported on small breaks. Buy the N/X bean spread or sell puts in Jly beans ---
only 5 weeks to trade. Flat price could remain strong but takes a trade over 14.55 to get the blood
heated up and stirring again. Nov should have problems at 13.25 to 13.35. Farmer should step up
pricing at that level
Corn is also stuck in a trading range. Could test 6.50 in the July but Dec should have problems taking
out the 5.25 to 5.35 level. Farmers should use this rally into that area to extend coverage. Bull spreads
look to still have some value here with basis levels bid well over Jly delivery equivalents ---it is just that
deliveries are a long way off and a lot of changes could take place by then. This market does not have
much of any weather premium built into current prices. The long term temps maps for warmer temps
across the south could have been a warning shot?
Beans got excited because of 1.0 MMT of bean sales in old crop between daily and weekly sales.
Suspect commercial were well aware of this prior to the reports and already positioned in the spreads.
Basis levels popped hard yesterday but were unable to keep the gains today? Several have asked me
why the bean basis is not stronger with all the biz taking place. The inverse has a lot to do with that. It is
very hard for a crusher or exporter to hold inventory of more than 30 to 45 days into this strong inverse
--- they have to be able to use up that inventory prior to the inverse melting away. Arg crop continues
to shrink and harvest will be close to done by end May. The export trade is pretty well done and most of
remaining stocks will be retained to crush there. Meal basis is way too strong at 18 over making US
meal at 22 over look competitive. This means US bean and meal sales will continue to be strong. Arg
soyoil basis also firmed today making US soyoil look like a bargain also.
July beans should be supported on small breaks. Buy the N/X bean spread or sell puts in Jly beans ---
only 5 weeks to trade. Flat price could remain strong but takes a trade over 14.55 to get the blood
heated up and stirring again. Nov should have problems at 13.25 to 13.35. Farmer should step up
pricing at that level
In Praise of the Speculators, Who Smooth Out Production and Consumption, and Benefit
Society
Society
From the article "Why Speculators?" by Percy L. Greaves, which originally appeared in the November
1964 issue of The Freeman:
"Frequently, the speculator is the first to foresee a future scarcity. When he does, he buys while prices
are still low. His buying bids up prices, and consumption is thus more quickly adjusted to future
1964 issue of The Freeman:
"Frequently, the speculator is the first to foresee a future scarcity. When he does, he buys while prices
are still low. His buying bids up prices, and consumption is thus more quickly adjusted to future
conditions than if no one had foreseen the approaching scarcity. A larger quantity is then stored
for future use and serves to reduce the hardships when the shortage becomes evident to all.
Since a price rise tends to encourage increased production, the sooner prices rise, the sooner new and
additional production will be started and become available. So a successful speculator reduces both
the time and the intensity of shortages as well as the hardships which always accompany shortages.
Likewise, speculators are often the first to foresee an increase in future supplies. When they do, they
hasten to sell contracts for future delivery. This in turn drives down future prices earlier than would
otherwise be the case. This tends to discourage new production that could only be sold at a loss. It also
gives manufacturers a better idea of what future prices will actually be. So, here again the speculator
tends to smooth out production and consumption to the benefit of all concerned.
A good example of how speculators serve society was provided in the coffee market a few years ago. A
small newspaper item reported a sudden unexpected frost blight in Brazil. Speculators immediately
realized that such a frost must have killed large numbers of coffee bushes. This meant much smaller
future supplies for the United States. So the speculators promptly bought all the coffee they could below
the price they thought would prevail when consumers became fully aware of the approaching shortage.
This tended to raise coffee prices immediately.
The effect of this was to reduce consumption and stretch some of the existing supply into the shortage
period. It likewise alerted coffee growers in other areas to be more careful in their picking and handling
of coffee so that there was less waste. Higher prices encouraged them to get to market every last bean,
which at lower prices would not have been worth the trouble. Higher prices also speeded up the planting
of new bushes. Since it takes five years for a new coffee bush to bear berries, the sooner new planting was
undertaken the shorter the period of shortage.
The speculators who first acted on this development served every coffee consumer. If these speculators
had not driven up prices immediately, consumers would have continued drinking coffee at cheap prices
for a time. Then, suddenly, they would have faced a still-greater shortage and still-higher prices than
those that actually prevailed.
By buying when coffee supplies were still relatively plentiful and selling later when the shortage was known
to all, speculators helped to level out the available supply and reduce the extreme height to which prices
would otherwise have risen. Speculators make money only when they serve society by better distributing
a limited supply over a period of time in such a manner that it gives greater satisfaction to consumers.
They thus permit other businessmen and consumers to proceed with greater safety and less speculation in
their own actions."
MP: In the example above, you could easily substitute "oil" for "coffee" and have a pretty good understanding
of oil markets and oil prices over the last few months, and perhaps gain an appreciation of the role of oil
speculators in helping to determine spot and futures prices for oil and gasoline, in response to changing
market forces globally. And you could also understand how the media in the 1960s might have charged
/blamed/accused coffee speculators for "high coffee prices," even though they were betting on market forces
(falling future supply), not against market forces.
for future use and serves to reduce the hardships when the shortage becomes evident to all.
Since a price rise tends to encourage increased production, the sooner prices rise, the sooner new and
additional production will be started and become available. So a successful speculator reduces both
the time and the intensity of shortages as well as the hardships which always accompany shortages.
Likewise, speculators are often the first to foresee an increase in future supplies. When they do, they
hasten to sell contracts for future delivery. This in turn drives down future prices earlier than would
otherwise be the case. This tends to discourage new production that could only be sold at a loss. It also
gives manufacturers a better idea of what future prices will actually be. So, here again the speculator
tends to smooth out production and consumption to the benefit of all concerned.
A good example of how speculators serve society was provided in the coffee market a few years ago. A
small newspaper item reported a sudden unexpected frost blight in Brazil. Speculators immediately
realized that such a frost must have killed large numbers of coffee bushes. This meant much smaller
future supplies for the United States. So the speculators promptly bought all the coffee they could below
the price they thought would prevail when consumers became fully aware of the approaching shortage.
This tended to raise coffee prices immediately.
The effect of this was to reduce consumption and stretch some of the existing supply into the shortage
period. It likewise alerted coffee growers in other areas to be more careful in their picking and handling
of coffee so that there was less waste. Higher prices encouraged them to get to market every last bean,
which at lower prices would not have been worth the trouble. Higher prices also speeded up the planting
of new bushes. Since it takes five years for a new coffee bush to bear berries, the sooner new planting was
undertaken the shorter the period of shortage.
The speculators who first acted on this development served every coffee consumer. If these speculators
had not driven up prices immediately, consumers would have continued drinking coffee at cheap prices
for a time. Then, suddenly, they would have faced a still-greater shortage and still-higher prices than
those that actually prevailed.
By buying when coffee supplies were still relatively plentiful and selling later when the shortage was known
to all, speculators helped to level out the available supply and reduce the extreme height to which prices
would otherwise have risen. Speculators make money only when they serve society by better distributing
a limited supply over a period of time in such a manner that it gives greater satisfaction to consumers.
They thus permit other businessmen and consumers to proceed with greater safety and less speculation in
their own actions."
MP: In the example above, you could easily substitute "oil" for "coffee" and have a pretty good understanding
of oil markets and oil prices over the last few months, and perhaps gain an appreciation of the role of oil
speculators in helping to determine spot and futures prices for oil and gasoline, in response to changing
market forces globally. And you could also understand how the media in the 1960s might have charged
/blamed/accused coffee speculators for "high coffee prices," even though they were betting on market forces
(falling future supply), not against market forces.
