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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Canuck Dave who wrote (15554)	6/20/2004 10:21:36 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

The MoP spec flush job has also opened up an excellent long opportunity in grains. Commercials are actually long wheat right now, but my favored trading vehicle has always been corn. I've had great trades in it both in 02, and 03. The price bust (now 2.79 for the "new crop": Dec, high was 3.41) in corn started in mid-April with the specs long 147,801 futures w options. That's been reduced to 24,721 as of last Tuesday, 64.82.65.31 and as corn was hit further this week, one could conclude the specs are virtually gone. This Hightower Report lays out the fundamental case. See "corn outlook spring update" here, as this was written in April, some of the stocks/usage numbers have gotten even more bullish: cbot.com which is that world corn ending stocks vs stocks to usage ()are at multi-decade lows, and US ending stocks ()are at a the second lowest in quarter century. Chinese inventories are gone, and their production is flat (). Larger amounts of corn are also being diverted to ethanol production (), making it a backdoor energy play. Plus corn is very energy intensive, with nat gas used for irrigation in drier areas. Like metals, the bear case strikes me as bizarre. I guess there is a pervasive "supply side" psychology that exists in commodities, that is hard to kill. Of course if the supply side argument can't be rationalized as in metals, then it's a demand side playbook instead, none of which is currently squared with reality. Still in the case of corn, bulls must remember that North American corn has a genetic memory, which allows it to recover from abuse (up to a point). It usually takes more than a short stretch of poor weather to harm it. Give it any relief, and it usually bounces back. So I go into this trade, with the notion that crops will likely be good. The point is, that they have to be good here, in South America, China, and Europe. I think the market is mostly priced for perfection, and that's the opportunity. Corn crop conditions are currently in good shape. () But that ignores that July and August are the key. Conditions decline if there is too much hot, dry weather. The eastern cornbelt was also hit with too much rain in late spring, that might not be properly factored in. ncga.aghost.net Also note in the Hightower Report how active and large managed funds are now. They could easily get right back into these metals, grains and energies, both as crack up boom trades and shortage trades. () all these variables can be tracked at this site: cbot.com