Markets | Curt Goulding

  • By J.D. Koch
  • 02 Aug 2019

This year is a great reminder of the Number 1 Law of Trading, the only thing I truly know is that I don’t know.  Number 2 is the only constant is change.  And we can never forget the difference between Truth and Facts.  Truth never changes and facts change all the time.  Also, remember, we need to feed that bull every day to sustain strong markets.

And, the definition of a weather market is the PERCEIVED, POSSIBILITY, OF THE POTENTIAL FOR A POSSIBLE PROBLEM. Weather forecasts are only that, forecasts (a guess).  Back in the spring the wisdom that once it stops raining, it will never rain again AND it will be hotter than hot.  So corn is going to new all time highs, $9 or $10 per bushel.  Well, it did stop raining and we are drying up the wet areas.  It did get HOT.  But, that was the right amount of heat at the right time.  Crops away from river bottoms look incredible.  Temps moderated and now we are getting timely rains.  No doubt we are going to have a smaller crop.  The market has been rationing old crop demand as well as new crop demand.  Ethanol margins are horrible.  Production is down.  Inventories are at record levels.  Old crop carryout is growing.  Brazil and Argentina are selling corn into Mexico, a traditionally only US market source.  Corn out of So America is offered from $20 per metric ton to $30 per ton discount to US offers.  I just read a scenario that plays out that we could see no reduction in carryout at the end of the 19/20 crop year.  That sets up Dec of 2020 heading to $3.50 because prices are encouraging corn over everything for next year.  The just of everything is that weather forecasts have been consistently wrong.  The genetics of corn are such that corn is becoming as tough as wheat in tolerating anything and everything.  We will see plenty more volatility.  The Aug report is going to be very important, as it will give us our best guess as to acres.  However, yield will remain a major unknown until into September.  Dec traded below $4 today.  It could go lower as managed money blows their brains, I mean long positions, out.  Trading range remains 4-5.

Soybeans are an interesting beast.  This market has tied itself to traditional corn / bean ratios.  Forget about that for the time being.  We are swimming in soybeans.  The Chicoms have announced yet another outbreak of ASF.  Their demand continues lower.  Pork prices are spiking higher.  Food inflation is increasing.  And, Mr Trump has announced that in September he will add an additional 10% tariff on $300 million worth of imports from China because they have failed to follow through on the promise to buy significant amounts of US ag products.  Are you surprised?  The Chinese economy is growing, but at a rate that is actually like a retracting economy.  Manufactures are moving out of China to more friendly places like Vietnam.  More than 2 million manufacturing jobs have been lost in China.  Yet, they have decided they will take a long view on dealing with Trump and the US.  The Chinese will wait until a democrat is president and know that that leader will wet their pants and give the Chicoms whatever they want and get nothing in return – their usual negotiating process.  Waiting 6-14 years is nothing.  They are a brutal communist dictatorship that does not believe in human rights and prefer to keep the people in a depressed state.  I expect soybeans to trade below $8.

Happy trading, Curt Golding