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Data Looms Large


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The data and opinions in this report are for general information use only and are not

intended as an offer or solicitation with respect to the purchase or sale of any futures

contracts. Although all information and opinions are believed to be reliable, we cannot

guarantee its accuracy or completeness. The open trade and previous recommendations

were suggested, but that does not necessarily mean any individual followed the trades

exactly as recommended. This newsletter has been prepared without regard to the specific

investment objectives, financial situation and needs of any particular recipient. Past performance

is not necessarily indicative of future results. There is a significant risk of loss associated with

trading futures and options. It should be noted that the impact on market prices due to seasonal

or market cycles and current news events may be reflected in current prices.

Jerry Welch, Commodity Insite!
Call me at 406 -682 -5010
Ennis, Montana 59729

Follow me on twitter@commodityinsite

Below is my weekly column from November 3, entitled, "Godsend Rallies". Hope there is something in my ramblings you find of interest.

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Godsend Rallies

Finally, enough hard assets are showing enough strength that values as measured by the CRB Index are on the rise. The CRB hit a new, 7 month high this week as traders and investors are modestly buying breaks rather than selling rallies. Certainly, a 7 month high with commodities is not as headline grabber such as stocks that continue to post new all time highs. Or, bitcoin that did the same. But for those in agricultural raising grains, livestock, cotton and so on, a 7 month high is something to stand up and cheer about.

It is interesting to note that the Wall Street Journal posted an article with a headline that reads, Why Are Markets Rising Everywhere? Investors Cant Stop Buying Every Dip. The article pointed out the obvious. That for the past 7 years, investors and traders have been buying dips with most paper markets such as stocks, bonds and currencies but only recently is the same strategy being employed with commodities. And that is no wonder since the U.S ag-markets are the cheapest, lowest in value compared to the stock market in the past 50 years.

Still, there are stiff headwinds facing the commodity markets in the near term. Foremost, there are no shortages anywhere. In theory, until supplies dwindle due weather concerns or an unexpected rise with demand, it will be difficult to commodities to sustain long long term gains. Supplies have to tighten!

Another drag and a big one on commodities is the potential for higher interest rates. This week, the Fed reiterated their promise, pledge or threat to hike rates in December. History shows that higher interest rates is bearish all markets with the possible exception of the U.S. dollar. The Fed hikes rates to slow economic growth and keep prices (such as commodities!) in check in an effort to fight inflation.

In the months ahead, it would not surprise me to see the CRB Index move higher yet as traders buy dips rather than sell rallies. Still, there is no shortage of any commodity and the odds are great that the Fed will indeed hike rates. Thus, it is impossible for me to imagine the commodity markets will somehow morph or quickly evolve into rip roaring, sustainable bull markets.

I am hopeful that commodities and grains can rise further, allowing producers to sell or hedge their production at better levels. But my great fear is that grain producers had that opportunity in July and hopefully did not pass on it. And my work shows that livestock producers had the same sort of opportunity this week.

In early July, the grain prices carved out important highs and values declined sharply thereafter. Corn futures rose to $4.15 a bushel but recently fell to $3.42. Soybean futures rose to $10.47 but ended this week around $9.77. Chicago wheat prices rose to $5.92 but a few days ago kissed $4.16. KC hit a $6.02 bushel but dropped to $4.14. And wheat prices in Minneapolis that rose to $8.43 but slumped to $6.14 not long ago.

In the case of grains. Producers could have and to be frank, should have sold several years production in early July. With a global glut of grain weighing on prices and a new growing season at hand in less than 5 months, a year from now, grain prices may be lower yet. That July peak in prices was godsend to have sold short. Or, hedged.

In the case of livestock producers, cattle, feeder cattle and hog prices have rallied sharply since the August lows. Cattle and feeders have rallied $20 to $21 and lean hog prices have improved $12. Each market this week rose to a multi-month high. The critter complex acts exceptionally well! Just as the grain complex did in early July!

However, if the USDA forecast of record amounts of beef, pork and poultry swamping the marketplace in the next four months is accurate, the odds of even higher critter prices is slim. The US hog herd is the largest in history with the 3rd largest sow herd in history. The past few Cattle on Feed reports have been down and dirty bearish. We may look back upon this time period and see that the strength with cattle, feeders and hogs was also a godsend rally for producers.

My lean is that grain and livestock producers should be sellers and hedgers now. It is exciting that the CRB Index is into a new 7 month high as traders and producers of agricultural markets are buying dips and not selling rallies. But with higher rates on the horizon, no shortages for any commodity and a new growing season just around the corner, further strength with grains or livestock values should be viewed as a selling opportunity.

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This morning, for all intents, the only markets higher in the Big Four: stocks, bonds, currencies and commodities are the U.S. debt markets. In the case of the debt markets, the Consumer Price Index will be released tomorrow and it should be a bearish surprise. Thus, the rally being seen this morning with the debt markets is likely to be short lived. But as always when it comes to reports, there is no saying for certain what surprises lurk hidden in the data. The report may be bullish rather than bearish.

My work, however, suggests that the CPI data will be bearish for most markets and in particular bonds, stocks and commodities. And as I type furiously away, the Dow is 151 points lower and the CRB Index in the ugly by 130 points. The day is basically bearish stocks and commodities and the same may be seen tomorrow. Only time will tell.


And believe me. The CPI data looms large to tomorrow. Very large


The data and opinions in this report are for general information use only and are not

intended as an offer or solicitation with respect to the purchase or sale of any futures

contracts. Although all information and opinions are believed to be reliable, we cannot

guarantee its accuracy or completeness. The open trade and previous recommendations

were suggested, but that does not necessarily mean any individual followed the trades

exactly as recommended. This newsletter has been prepared without regard to the specific

investment objectives, financial situation and needs of any particular recipient. Past performance

is not necessarily indicative of future results. There is a significant risk of loss associated with

trading futures and options. It should be noted that the impact on market prices due to seasonal

or market cycles and current news events may be reflected in current prices.





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About the author


Jerry Welch has been in the futures industry since the late 1970's and is a true veteran of the markets. He has been quoted often in Wall Street Journal and is author of Commodity Insite, one of the longest commodity futures newspaper columns in history. His weekly column has been published each week since the mid 1980's and is one of the most recognized names in the world of commodities.

Mr. Welch is also known widely as a, "so so" flyfisherman.  

His column is published by the Illinois Agri News in La Salle, Illinois, Cattle Today, in Fayette, Alabama as well as Consensus, in Kansas City, Kansas.

He can be contacted at 406.682.5010 for a view of his, "twice a day" market column that includes price forecasts and trading suggestions.

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