September 9, 2021
I will keep repeating it: According to the endless barrage of bullish analysis that has been non-stop out there since April…Corn, Soybeans and Wheat are NOT supposed to be trading into or approaching new 4-5 month lows…BUT THEY ARE…and I CONTINUE TO SEE ALL THREE AS HAVING FORMED MASSIVE TOPS THAT ARE IMMEDIATELY POISED TO BECOME NOTHING SHORT OF PRICE COLLAPSES.
I will repeat it again. NONE of this is supposed to be even close to happening…And so what we now have is an ENTIRE NATION of farmers who have been listening to analyst after analyst preaching, “Prices can only be heading higher!”, which has kept those farmers convinced that they should WAIT for those higher prices before selling or contracting their crops…So…what you now have is exactly the opposite of what all those farmers were expecting…NEW LOWS and NOT new highs.
And IN THE REAL WORLD…? When everybody has been waiting around, listening to all that bullish media and dreaming of higher prices, with prices falling and NOT rising, at some point, all of a sudden you do have every farmer in the country thinking, “Holy shit. This was NOT supposed to be happening. I need to get something sold before it gets any worse!”, and the next thing you know, literally from one day or week to the next, is THE WHOLE DAMN SOYBEAN (or Corn, or wheat) CROP STARTS GETTING MARKETED (SOLD)…BY EVERYBODY…AND ALL AT THE SAME TIME…and with the world full of sellers, and buyers KNOWING they can wait, what you DO then get is the sort of price collapse I have been calling for.
And when that finally does start happening, what you DON’T get is those billions upon billions of bushels sold and/or harvested in just a few days or weeks…that is, it typically goes on for a couple of months, which is why, over and over and over, as exhibited on the Soybean charts below (going back 40 years), you get pretty much straight down 20%-30% price collapses taking place within about 6-8 weeks…as, to some degree, EVERYBODY IS SELLING.
Farmers are just like everybody that trades…They REACT to what the market is doing…And even though they hate doing it, when the market keeps sinking day after day, they DO get disgusted by the opportunity they have missed, or just plain scared, and SELL MORE…and MORE…and MORE…That’s the real world psychology of how this stuff can, and often does, work…and once again, why commodity markets can, and often do, just go more or less straight down.
You’ve seen these charts before…which include pretty much the decline from every top I have seen in Soybeans since I entered this business in 1980…And they do, I believe, depict exactly what I’ve referred to above…where “surprising” BEARISH price action induces farmers to start selling, en masse, which then begets more selling…and then more again…and the same is true whether its Beans, Corn or Wheat.
Note the percentage declines and the number of weeks it took to do so…
Here’s the present…And all four of these ABSOLUTELY look like tops to me…
I might be just a dumbass old hack commodity broker, and am just dead, dead wrong here…but I do think these ARE all unquestionably tops…I think the timing is perfect for the short side…I think they are all about to collapse in the same 20%-25% fashion that has been the norm for as long as I have watched this stuff…And I think this is an IMMEDIATE opportunity.
And, oh yeah…We have ANOTHER crop report out tomorrow…and maybe it will also be perceived in the same bullish vein that they all have been…for months…BUT NO MATTER HOW BULLISHLY ANALYSTS “INTERPRET” THIS REPORTS NUMBERS, I THINK CORN, WHEAT AND THE SOYBEAN COMPLEX ARE ALL GOING RELATIVELY STRAIGHT DOWN FROM HERE. They have been sideways forever. Harvest is now cranking up…and there are billions upon billions of bushels, that sooner or later, HAVE to be sold…and as much as farmers might wish and hope prices will be higher, I think they will immediately be heading lower…and then SHARPLY lower. It’s just the way this stuff works.
Here are my recommendations. If you want just one market, I’d say go with the Soybean Oil…But I firmly believe the smartest approach is buying “units” of one put in all three markets. I think they’re all going down but which of them will go first…or biggest…is always something of a guess (like all of this really). So I view buying all three as “covering all the bases.”
Buying all three comes out to about $4500…Do the math for yourself if all, or part, or none, of this works…
And I will note again…Markets often tend to go down much faster than they go up…Most traders are buyers…And when markets are declining, FEAR and LOSING MONEY are the major factors in influencing participants to SELL.
And it may be dumb, but I just cannot imagine that all three of these markets are going to still be up at these levels, dead in the middle of harvest, 2-3 months from now. QUITE the contrary I think.
Call me if you’re interested.
All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Soybeans, Soybean Oil, Corn, Wheat