June 7, 2017
All I ever do here is try to show you my own research and show you what leads me to my own conclusions as to the trades I want to make…
I am now an aggressive buyer of
Corn, Wheat and Soybean Meal
This is an excerpt from ADM’s preferred weather
expert in a special report this morning…
He does NOT say the Heat Wave will go on forever…simply because he does not know…which is always the way it is…In my 37 years doing this, I have yet to see any weatherman accurately predict, “Today’s heat wave is going to turn into an outright long term event…or drought…for the next month or two.” BAD WEATHER sneaks up on everybody…But it ALWAYS has to start with a few days or a week that are too hot…but then it stays that way…I have no idea what this bit of weather news will evolve into but I do note that the grain markets definitely seem to have responded to it with FIRM upside action during the past few days..
What follows is not a political statement…just some science as it relates to Corn, Wheat and Soybeans
Plain and simple, the next 3-4 months are the most important part of the year for major crops here in the USA.
97% of climate SCIENTISTS support the idea of global climate change and global warming.
Anyone who disputes the fact that mankind IS affecting the atmosphere of the planet should sit down in an enclosed room and start lighting cigarettes for just a few hours…and observe the change in the “atmosphere” therein…and then understand that Earth itself is no different than that enclosed room. Our planet does have a ceiling, and without elaborating, I will say that CENTURIES of our presence…meaning centuries of geometrically expanding population…and centuries of any number of manmade emissions being released into the environment…HAVE changed and ARE changing the climate of this finite globe on which we live.
A current FACT from NASA and the NOAA (just scientists, not politicians):
Earth’s 2016 surface temperatures were the warmest since modern recordkeeping began in 1880, according to independent analyses by NASA and the National Oceanic and Atmospheric Administration (NOAA)…This makes 2016 the third year in a row to set a new record for global average surface temperatures.
Accordingly, aside from the fact that average temperatures are rising worldwide, those SCIENTISTS will also tell you that Extreme and/or Abnormal Weather Patterns are very definite consequences of global warming. And along those same lines, we all know that whether it’s drought, or flooding, or too cool, or too hot…or whatever happens that is NOT the weather norm…the end result can be overnight reductions in crop production numbers…which often leads to some of the biggest, fastest bull markets in Corn, Wheat and Soybeans that we EVER see…
With this, and a few other factors in mind (noted below), this newsletter presents what I would call a very cheap (and HIGHLY leveraged) bet on SOME form of weather event that could dramatically affect prices in Corn, Wheat and Soybeans during the critical next few months of crop development.
There are a lot of charts here so I am keeping my two cent opinion on the brief side…So here are a few important points I would make…
----All three of these markets have been depressed and sideways for about 3 years now…much of it at or below the cost of production…Simply stated, IT’S TIME FOR A MOVE.
----All three of these markets are seeing RECORD WORLD DEMAND/CONSUMPTION IN 2017.
----EVERYBODY knows what we have in the bins from last year’s production (in other words, current supply has already been priced into the markets).
----Conversely, NOBODY knows what will be produced this year…These crops are just getting planted or are still in the field…and are NOT “made” yet.
----Cumulatively, in Corn, Wheat and Soybeans, Large Speculative Funds have recently reached the largest short position in the history of commodity futures trading…In other words, there are MASSIVE spec shorts in the market…and to exit those positions, sooner or later, all those shorts will HAVE TO BECOME BUYERS (and probably not willingly).
Although recent forecasts have suggested we are about to see a hot, dry period enter the Great Plains and Midwest (which has already been boosting the markets for a few days now), there is NO WAY to know if we WILL have a true weather event in the coming months…But I would guess we WILL minimally have at least some degree of a weather “scare”, which, with all of the above considered, certainly could produce some extreme fireworks on the upside…in any or ALL of these three markets.
With this in mind, here are some examples of what some prominent droughts or floods have produced in the past…As I have often pointed out, the biggest fastest moves we get in the commodity markets is when weather becomes a factor…
So the picture should be pretty clear…When weather hits, the price changes literally heat up from one day to the next…but it’s NOT all done in just one day…and there is NEVER some single day where the market jumps up and you can thoughtfully decide, “Oh…Soybeans are about to rally $3.00 in the next six weeks!”. It’s NOT like that…If fact, if you want, go back and look through these major upswings…Imagine yourself looking at them in the earliest stages…Was the ANYTHING to suggest what was coming? And the answer is NOTHING. There never is. For sure, in retrospect, you can always look back and think “Well, that was obvious”, but I promise you it NEVER is…and you are kidding yourself if you think otherwise…Right now, we are clearing new several month highs in Corn and Wheat and in fact are only 6 cents away from NEW ONE YEAR HIGHS IN CORN…
So…Do I know what is coming? Obviously NOT…but what I DO know is what CAN be in the process of happening…and NOW is when I believe it is important to act…NOT two weeks from now when it becomes supposedly “obvious” that we are in for a rocket ride…maybe in all three of these markets…as they DO often get it going in tandem with each other.
I AM A BUYER OF ALL THREE MARKETS…HERE AND NOW…
Here are the long term looks…and what I expect…and what I am doing…
DO note that all of these markets…which DO swing up and down…have been laying around down here for 3 years now…
Here are the options to buy here…AND I FIRMLY RECOMMEND OWNING ALL THREE MARKETS…To “pick the one you like the most” would, I believe, in plain English, be just stupid.
Buy all three as one “unit” for $2163…Do the math and calculate where you would be if just one these works moderately.
I may be dead, dead wrong but I almost think it is impossible for all three of these markets to just sit here…or frankly, even go down from their current VALUED levels…for the rest of this summer…I believe SOMETHING has to happen here and I absolutely believe it will be STRONGLY HIGHER…again, in at least one of them.
If you think taking this risk makes sense, and you have the cash, do NOT sit there and “wait to see what Eurodollars do.”
I obviously do not know if any of these moves will be replicated…but I do know that now is the time to be positioned for them…And I repeat, there is NO WAY you are going to know WHEN you “should have been buying “ until long after the fact…So, for my money, you put your money on the table now.
THE WEATHER IS NOT NORMAL…OR SO SAY I….Also that weather events are never announced ahead of time…They just start happening…one day at a time…and that by the time the Drought or Flood is all over the news…it is TOO LATE to be getting in…
Give me a call…sooner the better I say…if you are interested.
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Wheat, Soybean Meal