It is the same story that it has been for much of this past year, the tight carryover from last year's bean harvest is meeting up with a reduced current year harvest pace and that has processors scrambling to secure enough beans to produce meal, which seems to be experiencing some tightness right now. That has the meal moving higher on the charts which is pulling both the beans and even the corn higher.
Take a look at this chart and as you do, keep in mind that we are on our way to one of the largest bean harvests ever with a huge expected carryover.
That dark line is the 50 day moving average. Yes, believe it or not, in the face of a massive upcoming harvest, the meal is over that key technical indicator. That is why the funds are buying. Remember, none of that group gives a hoot about fundamentals.
Meal has gone up nearly vertical some $44/ton since the beginning of this month and is trading at levels last seen in early September as traders began to get a true sense of the whopping harvest that was on the way.
I am closing watching its performance near this level however to see if it is going to fade. Farmers continue to be tight-fisted sellers of this year's crop, ( a huge mistake in my view ) as they cannot bring themselves to sell at current levels after being spoiled by years of sharply higher prices for their production. IF ( and I do not know ) meal is going to fail, it will fail near this level.
What makes me extremely nervous about this market is that once the panic selling begins among farmers, it is all going to come at once. The big question a trader has is exactly when that is going to be. I have the utmost respect for farmers who work long hours and deal with a multitude of obstacles at times. However, as marketers of the crops which they so proficiently grow, they suck! They turn bullish at exactly the worst time and become excessively bearish at the wrong time. In other words, they tend not to sell when they should and sell when they ought not to be selling!
By the way, the feeder cattle market hit limit down this morning. It was limit down on Tuesday and Wednesday of last week. Then it hit limit down Thursday early in the session only to move higher and close at limit up that day. It then went limit down on Friday and closed there only to start off this week ( MOnday) by closing Limit up. Let's see now, that is SEVEN CONSECUTIVE TRADING DAYS in which this market has either closed limit down or limit up.
And someone tell me that our markets are not utterly broken! I have been trading cattle for many, many years and have never seen them do this, ever! This is also the reason I strongly advise many would-be traders from NOT trading livestock unless you know exactly what you are doing.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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