Benevolent weather and falling demand ( in anticipation of weaker prices ahead ) has led to heavy selling across the entirety of the grain floor this morning. The result is that my grain index has notched a 42 month low! This is very welcome news for the livestock and poultry industry as well as for consumers who can expect to see lower food prices ahead ( assuming of course that the trade will eventually pass through the savings).
I should also note here, that according to the most recent Commitment of Traders data through 7-1-2014, Managed Money or Hedge Funds still remain as net longs in the corn market in spite of the fact that corn futures scored a 4 year low today. Also this same category remain net long in soybeans as well even though they have been caught on the wrong side of the market and are now in the process of liquidating long positions at a very rapid clip ( not to mention starting to build shorts).
This informs us that if this category decides to get aggressively short, we have further downside to go across the corn and bean markets.
Crude oil prices are also continuing to weaken although they remain high but are at least headed in the direction that will benefit consumers and business for the moment.
The weakness in crude oil and its products today, especially gasoline, is weighing on the Goldman Sachs Commodity Index, which I wish to remind the reader is excessively weighted ( in my opinion ) in its energy component.
Notice the sharp retreat from the top resistance zone which has knocked the index back to a 3+week low. Also note that it has fallen back below the recent breakout point near 660.
I am also noticing that Cotton prices are trading near an 19 month low today. That will help keep the cost of clothing from rising too abruptly... more good news for the cash strapped consumer. Cotton fiber competes with the synthetics most, if not all of, which are tied to crude oil prices.
With the yield on the Ten Year Treasury dropping to 2.616% today, it would appear that inflation worries, at least in the area of commodity prices in general, have subsided for the immediate moment.
"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
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