Grain / Cattle Market Test Again

[errolanderson]

The Feb bull run has been amazing for
both cattle and canola, but these
markets are again at another technical
crossroads. A bull market always has to
be fed.

The ultimate lead in these markets has
been the strength of stock markets in
2012 to date. Can it last? Believe
Greece is still just the warm-up act in
Europe.

Demand and fund buying has been a
powerful driver of canola prices of
late. But the cash market is due for
test very soon. Maybe by mid March . . .

Barley bids will be supported by roadban
season. 10 to 15 cent/bu premiums will
likely hold for a few weeks.

Like the cash pulse markets: ie: peas.
Stronger spring pea bids appear
possible.

U.S. cattle prices hit an all-time
record of $130/cwt, but will the
consumer accept a 10% beef price hike at
the supermarket? Cdn cattle prices
continue to show signs of weakness.

Is the U.S. economic recovery for real?
True or False

Soybeans are now technically overbought
and nearing exhaustion while the South
American harvest ramps up.

Cotton . . . I know we have differing
money supply viewpoints. If we live long
enough, we'll both be right. But the
money supply will affect the degree of
inflation or (in my opinion) deflation
ahead.

Interest rate hikes are 'dead in the
water' There is way too much debt out
there for central bankers to tinker with
this.

Is the pot stirred enough?

Errol

[parsley]

The U cannot recover. Pars

[agstar77]

If you cry wolf enough you might be right eventually. Probably a pullback and profit taking for a week or two.

[cottonpicken]

I use macro info to determine general market
direction in the medium/long term.

I use technical analysis for short term marketing.

I posted this 28 hours ago on canola:

I don't think we will breach 600,close enough
now,and 700 is even tougher hurdle,correct down to
525 and sideways for a time.

I have not run specific numbers on cattle and don't
play to close attention because i do not have a
position of paper or physical,but without looking at
the chart and only the futures price this morning i
don't believe the technicals have broken down
yet,which eventually they will.

Its not about being right all the time its about being
right 7 out of 10, and limiting your losses.

[wd9]

So how do you protect a hedge if you have
a crop failure? Hedging works only if you
actually have crop to sell, but is there a
way to get around the risk of not
producing anything and not having anything
to deliver against your hedge? Seem to me
the only way is not to hedge at all.

[cottonpicken]

Whoops,the daily feeder cattle chart has broken
trend.Guess i should look before i talk,lol.

[checking]

Markets are a lot like the weather. If you just say that it will be the same tomorrow as it was yesterday, you will be correct 80% of the time. That's 8 out of 10 for the flunkie mathematicians, the definition of trained or self taught economists.

Nevertheless, I continue to like the way Errol writes without the typical economic BS jargon.

[rhoff]

If you stay on this theme you will eventually be
right but how much does it cost you in the
meantime?
posted Jan 31, 2012 23:03      
Also, crude oil is at least $20 per  
barrel overvalued, maybe more. When that  
bubble bursts, corn and canola are in  
big trouble. U.S. corn could be a sub  
$5/bu market quickly. Canola may dive  
into a $9 to $10/bu range which is still  
considered high when looking at the big  
picture. 
 
Even bulletproof cattle could run for  
cover triggering some nasty feeding  
losses.  
 
These markets can tumble hard and fast  
if the right market ingredients converge 
I've seen it many times in my career and  
it will happen again. Commodities are  
clearly at deflationary risk in my mind. 
 
Errol
IP: Logged
Edit?    

[bucket]

If prices drop, does that not create an opportunity for more demand?

If a pullback creates demand, what happens to the rationing logic that is currently in place for canola?

[errolanderson]

rhoff . . . thanks for repeating.

Stand by this projection. Crude oil
remains highly overbought (in my
opinion). Precious metals also remain
overbought. Corn will no doubt be
volatile, but downside risk remains
high. USDA on Friday.

Cash canola bids may have a sharp
correction, but markets are always
right, not analysts.

Errol

[Kodiak]

Hey Errol, I suspect you are right. A correction is ahead of us. Could even be severe.
BUT. Timing is everything. In early December with Canola sub$500, it looked like the good times were all behind us. Now at $80 higher, that wasn't the case.
So while I know you are right, when do you think this is going to happen? It could, no WILL, make quite a difference.

[lesm]

I could always predict the markets with
almost 100 percent accuracy,however my
timing was horrible. If someone could
predict the weather, we could all be
better marketers. With all the
volatility in the world, financial and
climatic, I'm reluctant to hold any
position. Interesting times.

[errolanderson]

Kodiak . . . you are right, timing is
everything.

Typically, I can look like a donkey for
quite a while, but evolution of commodity
funds has made markets more volatile and
much tougher to access. Have to rely on
fundamentals ultimately, sort out market
noise and use a 15 year old broken ruler
as my technical indicator. No magic here.

[bucket]

errol

What happens when you link your historical trade data to that of the historical weather patterns?

It wasn't that long ago the western canada couldn't produce a 10 million tonne canola crop, what happens if the weather reduces the crop to sub 13 MMT???

[riders2010]

Why would you lay a historical weather map down? According to bgmb good farmers grow a good crop every year regardless of weather. Therefore you need to lay down a map of stupid farmers and good farmers and then you would see what the yield expectations for canola are next year! Cannot help but laugh as I write this. When we look at reality of yields what is the first thing we all look at WEATHER. When some look at the margins of stability program they say it is the stupid farmer.

Sorry to interrupt your conversation. But of course the weather map should be used and it would be interesting.