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Robert W Cummings wrote:
> Bought 99 corn and oats as the first step for fundamental reasons called to
> cheap to plant .
So you are referring to new crop, Dec 99 corn and oats. Nice story, but
you are overlooking one important fact. Due to large stocks corn is in a
carrying charge market. Or to state it differently, Dec 99 corn is a 36
1/4 cent premium to Dec 98 corn. The prospect of higher prices in the
future actually is a incentive to plant more next spring.
If you are paying this premium, you are simply paying the elevator
operator storage and interest to leave grain in his bin. If corn
supplies get tight, Dec 99 will go discount to Jul 99, which leaves you
out in the cold on your long Dec 99. Of course, there are about a
million different scenarios going that far out, but if you are going to
be long there is no justification at this point to being in anything but
the front month.
> Plus all the bad news the bears can stand. I do expect to
> buy more later at cheaper levels but so many bears should cause some short
> covering rallies before I do, maybe. Supply has overcome demand but with
> the government stocks program
There is no government stocks program anymore. It's now called freedom
to farm, which means they can plant as much of whatever they want.
> and the server weather patterns hopefully
> prices will be higher in the future. I use options to protect and reduce
> the inherent time premiums buying so far out.
Paying all the time premium plus the carrying charge, wow that's a lot
of stuff to overcome.
> Been my experience grain
> markets bottom before their supposed to, the norm will be harvest time.
> This not a recommendation to anybody but this is a trading list and just
> another idea only. Requires patience and capital and the rule is nobody
> knows what cheap is only the market and it ain't saying.... *S*. I'm just
> going in the grain business joining the farmer but without a farm and all
> the work he has to do as well.
> This same idea applies to meat because of
> cheap feed but will be shorter has more volatility and timing has to be
> more precise.
Nice idea, but the reality is that they are feeding the cheap corn
(trying to vertically integrate) which is creating record heavy carcass
weights. Stated differently, the tonnage of cattle being slaughtered is
Way up. Since the cattle market has a premium in the differed months,
you have the same problem. They feed the cheap corn longer in hopes of
higher prices, which floods the market.
Kevin
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