March 3, 2022

Driven by Putin’s cowardly and disgusting invasion, beginning a week ago Wednesday night and following through until today’s close, we have had more volatility in Corn, Wheat and Soybeans that I have seen in years…leading to what I can only consider to be artificially (and temporarily) EXTREMELY high prices, thereby, I believe, enormously upping the odds that the inevitable downside reversal in the row crops is going to be truly enormous.

The last stages of this rally have been the result of a one time event, and while I know that the rhetoric out there right now is,“Regarding Corn and Wheat, Ukraine is SO important that NOTHING can stop these markets from going much, much higher…that $10 Corn and $20 Soybeans definitely now in sight!”, I will tell you that it is EXACTLY LIKE THAT AT EVERY TOP…that there is ALWAYS some story or “reason” that argues for, “Sure, when it stops, it’s going down big, but right now, it’s still going a LOT higher.”…And it IS like that at every top, but PER THE HISTORIES I’LL BE SHOWING YOU BELOW (AGAIN), WHAT TYPICALLY DOES COME NEXT IS JUST STRAIGHT, STRAIGHT DOWN…And, yes, the crash will be occurring while the news is STILL wildly bulllish.

I REMAIN PARTICULARLY FOCUSED ON CORN AND THE SOYBEAN COMPLEX…AND MORE OR LESS CONSIDER THEM TO BE THE SORT OF “ONE GOOD TRADE” OPPORTUNITY THAT WAS PRESENT 4-5 MONTHS AGO IN EURODOLLARS…IN OTHER WORDS, A SHORT TRADE THAT HAS THE POTENTIAL TO PAY OFF IN VERY BIG MULTIPLES WITHIN THE NEXT 2-4 MONTHS…

But to be clear, just because I have a very strong opinion does not mean that I will be right... that if you follow my recommendations, and I am wrong, you could easily lose every dollar you have invested.

 Why I am so bearish…

precisely when all the headlines are so bullish…

 THIS LAST RALLY IS 150% DUE TO THE WAR…

Regarding Ukraine, while it has had a sharp impact on prices, the bottom line is that is has NOT changed the world’s overall supply and demand equation. Of course there may be supply chain, or shipping access, disruptions...or maybe even delayed planting, but I assure you that farmers WILL plant there…and one way or another, crops will be produced and exported to the world, my point being that, regarding supply and demand, I believe the bullish prices effects of the invasion will absolutely be temporary… For sure, Putin’s cowardly attack continues…and I have no idea as to the outcome…but I do think the markets have already MORE than accounted for what is happening there…

Regarding row crop prices going forward from here, I think it is imperative to remember these four factors:

One – Generally speaking, every farmer in this country (and around the world really) has heard nothing but bullish, bullish talk for months on end, leading them to believe there is no upward end in sight for prices, and has therefore led them to sit on MOUNTAINS OF PRODUCT HARVESTED PRODUCT FROM LAST FALL…THAT, SOONER OR LATER, HAS TO BE SOLD. For sure they can store it for a while, but both space for new crops and cash flow needs dictate that they WILL become major sellers…and it would not be uncommon to see them selling…en masse…in the hole as prices fairly collapse in what I been saying is the INEVITABLE decline that has to come sooner or later…And as I keep repeating, that decline is often relatively straight down.

Two - WHATEVER the outcome for all the weather talk that has been swirling out of South America, all of those crops WILL SOON be harvested and coming to market soon…and when that “harvest pressure” is combined with all the North American product that needs to be sold, it just seems easy for me to imagine a severely weakening price scenario.

Three - Don’t, even for two seconds, forget that the Chinese understand that all of the above will be happening…And that they KNOW that their buying is pretty much THE primary bullish factor in the markets…And that as they are NOT stupid, to see them virtually “disappear” on the demand side for the next 3-4 months would not be a surprise…And is actually what I can recall them doing on at least two prior MAJOR occasions in Corn and Cotton…where their buying was instrumental in producing big bull markets…and then they became almost nonexistent as buyer for the ensuing year or two…while the markets tumbled and analysts kept up the “when China buys” bullish battle cry all the way down.
 

Four - If all it took was a computer to take the supply and demand stats for any crop and predict that the price should be “x,” any two bit trader, company or organization with a 10 year old desktop could plug in the universally available crop production and demand data and make millions by “knowing” what the prices were going to do…which we do know is not EVER the case. I LITERALLY cannot count the times when stocks-to-use ratios were just off the chart bullish (or bearish)…and the markets did exactly the opposite of what they were “supposed” to, so when you see all the graphs indicating how tight supplies supposedly are, I’d say IGNORE THEM. Those stats are reflecting the past…not the future.

 
One more time…I think the last week’s action is CONCLUSIVELY establishing the top in row crops for at least the next few years. Believe me, If you don’t think the upside price action of late…with Crude banging up $10 a day, or Beans jumping up a $1.00 at night, or Corn and Wheat being limit bid for days on end….hasn’t TOTALLY blown ANY last shorts out of the market…and brought in any last FOMO buyers thinking the markets were going to the moon…then I’d say you understand nothing about the markets and the psychology of traders, especially when fear and greed are at their extremes…

And so, I don’t care HOW bullish the news might be right now, I maintain that ANY given day can be the last up day…INCLUDING TODAY…after which Corn and Beans just totally, totally fall apart….

Back in January, I posted EVERY Corn top going back 50 years…Here’s a recap of just the past 20 years…

AND I CANNOT EMPHASIZE ENOUGH, AT EACH OF THE NOTED ARROWS IMMEDIATELY PRECEEDING WHAT ARE VIRTUALLY ALL STRAIGHT DOWN MOVES IF YOU THINK THAT EVEN 1 ANALYST IN 10 WAS SAYING, “SELL HERE!”, I WILL SAY THAT YOU COULD NOT BE MORE WRONG. IN MY EXPERIENCE, IT NEVER, EVER HAPPENS LIKE THAT…In other words, at every top you see here, ALL of the news was nothing but BULLISH…just like it is right now…

THE PRESENT

And as I also documented in another January newsletter, for the past 50 years, Soybeans top out in exactly the same way. Over and over and over again…Since the beginning of commodity trading…

I think Corn, Wheat, Soybeans and Cotton all have nowhere to go but down from here…And for me it’s simply of question of how they will do it…and how to manage our positions as the decline takes place. History indicates this break CAN be incredibly straight down for a number of days…or it can just sell off some (big though), and then consolidate, before moving lower…of course having rallies along the way…but in the end, they all just go down, as I keep saying, at least 25-30% during the next 2-3 months.

Right now we are just sitting tight on our puts…many of them, thanks to the “2&1” approach, with strikes having been established near the high’s during the past few days, and I CONTINUE TO RECOMMEND SHORTING CORN, SOYBEANS, SOYBEAN OIL AND COTTON—HERE AND NOW…REGARDLESS OF WHAT NEWS YOU ARE SEEING IN THE PRESS…So if you are interested in getting a piece of this, absolutely know that I will be telling you, “Whatever you do, be sure to buy both sides.” As I am forever reminding people, if I am just moderately right about the size of the declines that are coming, I promise you, you WON’T miss the extra bucks you have spent on “insurance.”

Lots of ways to do these markets…with more time, or less time…and obviously, various “both sides” approaches…including 1 call and 1 put…

Give me a call if you want to look at possibilities…

And believe me, just because I have been bearish…and wrong…has NOTHING to do with what’s coming next here. I was “wrong” about Eurodollars for 6 months before it finally got going…but when it did, IT WAS BIG…And while this absolutely does not mean I will be right about the crops, a BIG move IS what I am expecting…Just history guys. It’s the way these markets move…

As I keep saying, if you pass on shorting these markets at these levels, I think you are passing on shorting them at prices that won’t be seen again for YEARS.

It IS always bullish at the top. That’s why it’s always so scary to step in and SELL…when every analyst around is saying, “Not here!”

 Pick up the phone...and get on something here…

 Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

FUTURES TRADING IS NOT FOR EVERYONE. THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS NO GUARANTEE YOUR TRADING EXPERIENCE WILL BE SIMILAR TO PAST PERFORMANCE.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Soybeans, Soybean Oil, Cotton