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Big Week In the Grains With USDA Report and Fed Meeting


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 Hedge fund money has been pouring into "commodities" the past several months as investors speculate on the promise of additional economic stimulus coming from the US, Europe and China. My question is what happens "IF" the powers-that-be disappoint? From the reports circulating the past few days, money flow into commodities just recently hit a new one-year high. In return, gold has traded up to six-month highs, copper has been seeing terrific gains the past few weeks, the corn and soybean markets recently ran to all-time highs and the energies have strong the past several months. The bottom-line is "money-flow" has been steadily pouring into the commodity sector on hopes of more quantitative easing. The CFTC recently reported "managed money" had increased their bullish bets on commodities to more than $111 billion as of last week. The fear as we approach another Fed meeting (this Wed/Thu) is that they could disappoint the trade by electing to "do nothing." Connecting the dots you have to figure if the funds have been adding length in anticipation of the big carnival coming to town, a few might get cold feet as they get closer to the front of the line. Essentially meaning fund managers who are scared about the Fed's rhetoric may reduce some of their long exposure heading into the big event this week. As we saw yesterday, just the slightest in fund liquidation could cause a few ripples in price. I do NOT look for this to be a longer-term trend or reversal of "money-flow." 

As for today, I suspect we will see more market consolidation ahead of the USDA report tomorrow morning and the highly anticipated Fed announcement Thursday afternoon. I continue to like the thought of being a buyer of Dec12 corn on the breaks and staying long bull soybean and soybean meal spreads. Spec's should continue to remain long going into the report, just make sure you are comfortable with the risk you have on the board heading into the numbers. Producers looking to make sales should pay close attention to the price action the next couple of days, a bullish USDA report followed up by a bullish announcement of more economic stimulus by the Fed could give us that pop to the upside we have been waiting for. Specs may want to use the initial upside momentum (if it occurs) as an opportunity to bank more profits.  With the Fed meeting following up the USDA data (the next day) a few of the funds might opt to take a little exposure off the books if they can catch a bullish number. In other words there is a chance you could see a "buy-the-rumor / sell-the-fact" type trade following an extremely bullish report.  I have included a worksheet below for tomorrow morning's report. I will get our information out right AFTER we have a chance to digest the numbers and report the specifics.   

 

For the rest of this story and more insight into what the Hedge Funds and money managers are looking at, sign-up here to receive a RISK-FREE trial of my Ag Markets commentary.  In this daily report you will get my thoughts on where prices are headed and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  


 



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Helping Producers With Cash Marketing & Hedging Strategies.

Kevin Van Trump, CEO Farm Direction

As a professional traders for more than 20 years at the CBOT and the KCBOT, I know just how important it is to have the right information and strategy in place when trying to capture returns in these markets.

In an effort to better help producers with their cash marketing strategies and hedging techniques I recently left the exchange and launched Farm Direction.  I recently partnered with Ag Hedge as their proprietary market analyst, and now produce a daily e-mail that is jam packed with insightful commentary, helpful tips and detailed strategies you can use to generate better cash sales and hedging positions.

 

You may reach Kevin at farmdirectionreport1@gmail.com

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