AM markets: should ag investors grab the 'falling knife'?
Will a new month bring a change of heart in grain markets?Trading house Ecom (actually speaking on cotton) reminded of the old market dictum, "don't catch a falling knife - let it hit the ground and pick it up".The question is whether grain futures, and cotton ones for that matter, have hit the dirt, with Chicago and Kansas City wheat futures setting 10-year lows this week, and corn futures hitting their weakest in nigh-on seven years, all on front contract bases.There was some cause for optimism for bulls, and not just because of another market adage that a "new month brings new money" in grain markets.(It is also, for the record, the start of the 2016-17 marketing years for corn and soybeans in the US.)'Potentially a sign'The wheat market received a slice of hope in a late rise in the last session in the Kansas City hard red winter wheat, to end in positive territory.Moreover, the discount of the September contract to the December lot tumbled by nearly 10% to $0.26 ¼ a bushel, reducing the disincentive for producers to sell now."The Kansas September-December spread rallied sharply after opening higher," Tobin Gorey at Commonwealth Bank of Australia said."The rally is potentially a sign that the market has taken the hit from Egypt and regained its poise," he added, referring to the dent to sentiment from the return by the country, the top wheat importer, to a zero tolerance policy on contamination of cargos with the ergot fungus.With ergot, which can cause hallucinations if ingested in sufficient quantities, viewed as very difficult to eradicate completely from samples, the u-turn has raised worries about the extent of the grain which Egypt will be able to import....MORE