Saturday, April 23, 2016

After Incredible Spike, Grain Futures Plummet

In the introduction to Thursday's "One Commodity Trader Writes: "What Is Happening Has Absolutely No 'Reasonable' Explanation" I noted:
...There is so much money flooding into oversupplied** commodity markets that it is irrational/borderline deranged.
Welcome to my world.
Here's how nutso it is. On April 20th the folks at Agrimoney, who keep pretty good tabs on agricultural commodities headlined one of their late stories "No end to fund-fuelled ag rally, as grain futures soar again". The grain complex traded up an additional 1% on the morning of the 21st and then reversed:
To put that in equity terms, the drop from Thursday's top-tick is equivalent to a 1600 point whack in the Dow Jones Industrial Average.
In under 36 hours.

Anyhoo, here's Agrimoney with the latest:

PM markets: wheat futures plummet, as funds back off

Market watchers have been warning that the fund buying driving this week's rally couldn't last forever, and on Friday it dramatically pulled away.

Wheat and corn futures, which fell back from multi-month highs in the previous session, accelerated downward, while the soy complex moved sharply lower.

"I haven't seen any fundamental reason for the selloff," Kim Rugel, at Benson Quinn Commodities, told Agrimony.

"It seems to be fund liquidation. We really overdid the market, and now it's going back.
"Today is an emotional day," warned Paul Georgy at Allendale, early on Friday. "We're at a point where we need to be looking at cash sales."

Mr Georgy noted that with front month options expiring, and the week coming to the end, there was potential for profit taking. And profit taking there was. 

Eyes on the CFTC
"It feels like the fund buying of the last week in the grains and last month in soybeans has come to an end," said Brain Henry, at Bensonn Quinn Commodities. 

"The trade will look for confirmation of big fund buying on this afternoon's Commitment of Traders report," warned Mr Henry...MORE
And we'll be back with more later this weekend.