Thursday, April 21, 2016

"One Commodity Trader Writes: "What Is Happening Has Absolutely No 'Reasonable' Explanation"

I was actually thinking about writing something similar just this morning as part of a mea culpa for what's probably our worst call since going long the Germans in '40, corn listlessly drifting down until a La Niña related price spike up later this summer.
Here's how that worked out since the big drop* on March 31 (over on the right side of the chart):
There is so much money flooding into oversupplied** commodity markets that it is irrational/borderline deranged.
Welcome to my world..

From ZeroHedge:
One commodity trader writes in with some very unique observations. From trader "Peter"
* * *
The insanity has now fully spilled into the commodity markets – a market which I professionally made a transition to after the 2008 crisis from the financial markets, simply because I believed it was a market that would still function according to true fundamentals…

I guess that only lasted so long…

The commodity markets have been prone to excessive speculation for years, but at the end, the thought of specializing in something “tangible” that EVENTUALLY would have to revert back to true supply and demand fundamentals made all the sense in the world.  Specially with the true circus that the financial markets have become since 2008…
* * *
To: "Peter"
Sent: Wednesday, April 20, 2016 1:35 PM
Subject: volume totals today

774K of soybeans traded today and that would be a record by nearly 160K contracts as yesterday set the record at 615K.

Over 88K Jly/Nov traded today and 97K May/Jly traded.  Unheard of non-roll numbers.

Meal volume was 270K and we have to think that was a record as well but not 100% on that one.

Lots of ideas around to try and explain the move: from commercial short hedgers blowing out, Chinese pricing, product switching from Argentina to the US.

Not really sure if all or any of this is true but it was quite a wild session
* * *
From: "Peter"
Sent: Wednesday, April 20, 2016 2:41 PM
Subject: RE: Some staggering volume totals today

Man… I would be VERY surprised if this was due to any of the reasons people are mentioning…

    Chinese pricing – I am very positive it does have something to do with it, but for the overnight session – not the daytime.
    Commercial hedgers blowing out – very possibly adding to the mess – but no way commercial volume takes us to these levels of ridiculousness in total volume…
    Product switching from ARG – yep, because we REALLY need to ration our 400+ mb bean stocks… LOL

This is way past insane, ridiculous, etc…

The “fundamental” reasons people are trying to ping to this are simply a nice “window dressing”…

There is nothing else that can explain this other than you know what?

Here comes my Very-REAL Conspiracy Theory: the stupid FED and other Central Bankers around the world acting in unison to artificially raise inflation so that they can hopefully get out of the F’ing mess they got themselves into with this low/negative rate BS.  Call me crazy, and I am not a “conspiracy theorist” – but what is happening has absolutely no “reasonable” explanation.  So I have to think outside the box…

The FED and other Central Banks have already destroyed the equity and other macro-financial markets… it is now turn for the commodities markets…

I am serious … I really am… I wish I was just being sarcastic… but pause for a moment and think about what is written above…MORE
See also February's You Want Inflation, "Why doesn’t the ECB just buy oil?".

*March 31
USDA Corn Reports: This Ain't Rock and Roll, This Is Genocide

**April 12
USDA: World Agricultural Supply Demand Estimate