The thesis of those who run our economy has been: If we can just provide enough economic grease to keep our own wheels turning the development of BRIC economies will, eventually, create demand for our goods and services. This is still probably true in the long run. What a different world it has become when our economic horse has become hitched to someone else’s wagon.
The month of May has not been kind to the soybean market. In fact, I’d say it’s bearing the brunt of a perfect storm of bad news. Old crop, July soybeans are down more than 10% for the month while this year’s crop is fairing only slightly better. This beat down has come from all angles, including weather, speculative traders and the global economy. However, once the dust settles, this may prove to be the best buy of the summer.
The inability of Greece to form a government along with the tremendous support for radical parties is indicative of a sovereign nation refusing to give up control. The bailout funds are already being withheld as the Troika sees the writing on the wall.
The general consensus of the week’s events can be summed up as deflationary. Unfortunately, this bodes poorly for global economies and unravels the tenuous global grasp on a Greek default and European Union unrest. We’ll take a brief look at the Greek and French elections, their effect on deflation and social unrest and finish with three places to invest that should beat negative yield Treasuries and deflationary assets.
The Spanish debt auction proceeded in an orderly fashion even as yields crept higher. The general consensus appears to be that Spain is too big to fail. I would suggest that Spain might be too big to save.
The atypical mad cow finding in California creates the standard, “sell first, ask questions later” reaction. However, a close examination of the effects mad cow disease on live cattle futures suggests that buying the market’s sell off may be the correct approach to trading it.
One hundred and fifty years ago Congress passed the Legal Tender Act, authorizing the use of paper notes to pay government bills. This week, Utah Governor, Gary Herbert signed into law House Bill157 allowing gold and silver to be used as currency in place of increasingly worthless paper notes.
There are two storm clouds on the horizon the Euro crisis and the U.S. equity markets. These two episodes could combine to force global equity markets lower, sharply hike interest rates on sovereign debt and create a super rally in the U.S. Dollar.
The Prospective Planting report made two thing clear. First, the world needs more grains. Second, farmers would rather grow high profit corn than beans. The acreage imbalance has the potential to send the bean vs. corn spread to record levels.
The USDA Prospective Planting Report sets the tone for this year’s U.S. crops. Recently, analysts’ estimates have been less and less accurate which has created lots of volatility within the grain markets including several limit moves on report days. Statistical analysis of the grain markets’ behavior provides us with some quantitative evidence of what to expect and how we can trade the Prospective Planting Report successfully.
