Up up and awry

[WRAPper]

Lee
I'm afraid my trigger finger didn't get pulled yesterday after I saw the overnight and the corn and soybean report. Nothing like positive market news and now the NOAA unscheduled report on an expanding drought area and intensity in the US (and into Southern Canada) to get you off your marketing plan.
Now the lets not get greedy angel on my right shoulder is fighting with the devil on the left that keeps shouting "beans in the teens and 7 dollar wheat!!!!"
Nice to have this problem though, and yes I know a person need to just as disciplined in a rising market as well as a falling one too.
I'll sure take it over the last couple years marketing wise, now if we can just avoid the golfball sized hail that seem to be happening on both sides of us this week and pick up one nicely timed inch of rain.....

[charliep]

Talked to my brother around Calgary and he is among the unlucky who got hail. How wide spread was the storm around Calgary? Have other areas had hail?

[rook]

I could have guaranteed today would be a huge day for the markets as I just priced some yesterday.

[melvill]

As I watch K.C. and Minnie wheat at 9:23 a.m. Tuesday, Dec Minnie is up 8 1/4 cents and KC is up 4 cents.

Interesting note: Dec K.C. and Minnie are finally trading at par after K.C. traded at a significant premium to Minnie for quite some time. Of course, it means that Minnie HRS wheat is now taking the leadership role in U.S. wheat price discovery.

Dollar is off 1/2 cent this morning, too.

Remember this is a rollercoaster. Make certain you're ready for when the funds stop being willing to pull it higher.

[AdamSmith]

When considering how high grain prices can go, it's hard not to think about other commodity prices like crude oil or even stock prices to realize that new plateaus can happen, but can they happen with ag commodities? or can ag commodities never break above their historical price ranges? What are some of your opinions here.

[melvill]

Good questions, Adam Smith. I'm going to answer them with my OPINION not known, verifiable facts.

To me the most important thing to remember is that all markets, including futures markets, operate on people's perceptions of future events or future conditions or future consequences.

In the world of ag commodities, the perception is that producers world wide can, through better technology - mostly genetics and agronomy - increase the production capability of the factory. And in the struggle to approach or maintain profitability, producers generally do whatever they can to increase the production cability of the factory. So far this increasing-efficiency perception has proven largely correct. The industry keeps shooting itself in the foot.

Sometimes producers even increase the size of the factory. Witness the increased soybean acres in Brazil over the last years. Witness the increased spring wheat acres in the nothern U.S. and western Canada between preseeding planning and the end of seeding. The worst thing for high prices is high prices.

Now look at oil production. The market perception is that all or nearly all of the cheap oil, world wide, has been found. Any new oil to be discovered or produced will cost much more to find, develop and get to market. If prices don't increase to "buy" that new oil, the market perception is that increasing consumption will create shortages. The other market perception is that consumption will continue to increase until the price is so high that rationing will occur. In the U.S. that rationing hasn't occurred yet. And it certainly doesn't seem to have happened in China yet, either. The worst thing for high prices is high prices except where the market perception is that the factory can't produce more from the same factory size and the factory size can't be easily increased.

Worse for ag production - it seems - my perception- that the world's most affluent consumers would rather buy fuel than food.

Other's thoughts?