Regardless of your opinion, you can not dispute the fact that money has been leaving the trade. Just in the past 30-days the funds have dumped over 50,000 long corn contracts and more than 40,000 soybean contracts. Remember, at one point in time last year the funds were long close to 500,000 corn contracts, now that number is closer to 200,000. They were also long close to 300,000 soybean contracts, now they have less than 100,000 long soy contracts. If you believe the "funds" are the horsepower that drive our pricing engines than you can clearly see we have gone from sitting behind the wheel of a new Ford Mustang Shelby GT 500, that is pushing 660 plus horses, to driving a 4-cyl Ford Focus, that is spurting up every hill as it pushes only 160 horses.
In a nut shell, we need more fuel on the fire, we need more bullish stories to get the funds excited and back in the game. The problem is I am just not seeing it near-term. Sure, one could argue that there is a US weather story brewing, unfortunately that is still a little ways off on the horizon. You could argue increasing Chinese demand, but from what I have heard the past couple of days the Chinese soy crush margins seem to be softening, and there is talk now that their demand will setback even further during and immediately following their upcoming Lunar New Year Holiday, therefore we are not as bullish as we once were about near-term old-crop Chinese demand. We were also hoping South America would have been sold out of corn exports by now, but that is obviously not the case as they continue to win over more and more traditional US purchasers. There is also no real South American weather story to speak of. Yes, Argentina is dry in some areas, but it is lacking the extreme heat to drastically reduce the crop, and it seems that every reduction in Argentina production is meet by an equal or greater increase in Brazilian production, net-net nothing real exciting or bullish to speak of on the South American front. One could also make a bullish argument about the extreme heat in Australia, the problem is planting is still two-months away, so there is just too much time still remaining to get overly excited about this story as well.
I would like to be as bullish as every other producer out there, the problem is until we get some type of NEW, near-term bullish "headlines" that excite the managed-money, I am afraid we are going to be stuck cruising around town in our less than powerful, fuel-friendly Ford Focus. Understand, there is nothing wrong with a Ford Focus, but with as much weight as we currently have in our vehicle (meaning with corn prices already above $7.00 near-term), we are going to have a real tough time climbing, at any rate speed, up the next price mountain. A Ford Focus down on flat ground around $4.50 performs a whole lot different than a Ford Focus heavily weighted down up in peaks of the Rocky Mountains.
Some of the most worldly advice on the trading floor is that bull markets most always end on bullish news and bear markets on bearish news. In other words you will know a bull market has ran its course when it no longer reacts positively to bullish news. Likewise you will know when a bearish market is close to ending by when the market no longer moves lower on bearish news. Think about this for a second, the USDA yesterday announced a sale of 620,000 metric tons of new crop soybeans (over 1.2 million the past couple of weeks)...yet the NOV13 soybean contract did next to nothing, in fact at one point following the sales announcement the new-crop bean contract actually traded down over -$0.10 cents. My point is this is not the type of reaction you would traditionally see from a "bullish" market. I have learned through the years, the markets are somewhat like your own kids, be careful when they are acting sick, strange, or just not being themselves...its generally a sign that they are about to puke!
As seen on the Van Trump Report
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