Weekly Market Comments: 6/16/10
Right for the Wrong Reason We ended the month of May comfortable with the adequacy of old crop corn supplies. However, we abandoned the arrival of lower overall summer prices (through pollination) due to the annual market reaction to drought concerns.
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Oats as a Price Indicator
There are a number of recent factors, including money funds, that were not part of market price analysis only a few years ago. One that has been around since the 1930's is oat price action. The last 5 days in oat prices have been interesting.
On Monday, Farm Journal writer Chip Flory gave a nice perspective on oat's clairvoyant abilities.  "I started on the floor of the Chicago Board of Trade in January of 1988. One of the first lessons I learned was to pay close attention to what happens in oat futures. It was a low-volume market dominated by commercial oat handlers. (In other words, there wasn't much speculative interest in oat futures until "things heated up.") Generally speaking, that's still the case. It's a low-volume market dominated by commercial activity. That means the oat market has been a "leading indicator" of what's really taking place in the grain markets. If there's general crop concerns, the oat market should be one of the (if not the) first markets to show that concern. Commercial grain handlers generally will not establish long positions unless they believe there is a good fundamental reason (tight supplies, big demand or a crop problem). Also, oats are one of the first spring-planted crops in North America and one of the earliest-harvested crops. That's another reason traders still believe oats can be a leading indicator for the rest of the grain markets."
Learn More: Read Chip's Full Comments
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 A look at the recent price components of margins in the renewable fuels industry warns that the summer is not going to provide any vacation opportunities for risk managers.
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