By: Dan Hueber –
While I do not believe that it exists to the same extent as it has in the past, I have been in this business long enough to know that often time speculators in commodity markets are viewed as the “enemy”. “Those blankety-blank no good speculators are just manipulating and pushing our prices around with little regard to how much money we are losing and most of them would not even know what a corn plant was if it slapped them across the face.” You know the old line “If I have a dollar for every time someone gripped about speculators, I would be…” Of course today, speculator should be synonymous with Funds as that would appear to be where a sizable portion of speculative money invests in commodities and depending on which way they are positioning in the markets are either regarded with scorn or praise. I guess you could say they are F-F-F. Funds are Farmers Frenemies. Pretty much since the beginning of the year though, they appear to be on the Friend side of that oxymoron of a word and again last Friday were the force that pushed us up to the highest levels for the year for corn and wheat and up towards the highs in beans. It is estimated that they purchased 14,000 contracts of corn, 10,000 wheat and 5,000 beans on that day. Note that on the corn, bean, wheat combination chart we have now reached up to the highest point traded since July of last year. Please do recognize that the action we have witnessed thus far for the year is very similar to what was occurring last year and the buying enthusiasm could very well soon exhaust unless we find ways to continue feed the bulls. That said, the overall pattern would appear to be one that portends higher prices down the road. So, at a minimum, the next time you are tempted to demonize the speculator/funds remember the quote often attributed to Machiavelli, “keep your friends close and your enemies closer” as in this case they are often one in the same.
Grain and soy markets do appear to be encountering a little headwind this morning but have done nothing so far to suggest that the advance has completely exhausted. Macros are by no means helping as we have energies and metals trading softer while the dollar is higher.
Last but not least this morning, I would like to point out that today is the birthday of one of my favorite, if not favorite American artists, Grant Wood. Certainly, most well-known for his iconic painting, American Gothic, the “Iowan” had the gift to capture rural America like none other. If you have the time, here are links to his gallery in Amamosa, IA http://www.grantwoodartgallery.org/grantwood.htm as well as an online gallery of some of this works http://xroads.virginia.edu/~ma98/haven/wood/index.html.