Ag Time

John WalshGeneral Commentary

The soy under a bit of pressure. The recent rally in meal and beans may have found a peak. (Perhaps) The meal has bounced on a bit of recent strength in domestic cash markets. The global markets have bounced a bit as well. This should prove to be short lived if the macro fundamentals are in play. ( no guarantees ) The USDA will release numbers friday that will give us a look at how big the carry is. In addition the wet weather is concerning that more bean acres will be added. History shows this could be the case. The Chinese demand remains on the weaker side. this trend will continue. The US are not the weakest prices in the world. I will also say that the correlation between what the cash and the board has gotten further and further apart. I reread a old article that Tim Hannigan wrote a few years back. Tim worked with us and was highly regarded for his analytical skills. A great man. Anyway, he made the point that given the ridiculous amount of fund money with no trading limits ( position size ) The relationship between the futures and the cash will continue to move in opposite directions. The reality of the market is not what it used to be, or should be in my opinion. This allows for moves that from a fundamental standpoint are sometimes difficult to figure out. The function,or one function in theory is convergence. The futures and the cash are more or less correlated. Hard to always find this is the case.

The Corn was a bit on the defensive today. The corn has the potential for a move to the upside. Will this play out ? The carry over is poised to decline. This will happen if, 1) The acreage is reduced due to weather 2) The acreage is reduced due to the corn bean ratio 3) The Chinese continue to purchase corn from the US. The global balance sheet could decline as well which is problematic given the Chinese currently hold 2/3rd of global carry. I have advocated being long corn, which by the way has been wrong. Is the tide turning. This week could be important. There are quantifiable opportunities in both the futures and options. lets see what happens

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