July 1, 2011 - The Great Grain Market Massacre

Featured Trades: (THE GREAT GRAIN MASSACRE), (CORN), (WHEAT), (JJG), (DBA)

2) The Great Grain Market Massacre. Grain prices were slaughtered today in the wake of a bombshell of a report from the US Department of Agricultural showing that plantings were much larger than expected. Corn and wheat were limit down, and the associated fertilizer and equipment stocks were a shambles.

Corn took the biggest hit, with the government seeing acreage rising from an expected 90.76 million acres to a stunning 92.28 million acres. Of the open interest of 500,000 contracts in December corn futures contracts, 200,000 were for sale at market down 10%. Synthetic instruments were trading at levels indicating at least a further 5% decline tomorrow.

The ags have been regular earners for me over the years. I caught a double a year ago in wheat, just as the Russian fires were getting started. Except for a few long plays in January, I have been largely absent from the space this year.

However, the long term fundamentals in favor of a bull market are still in force. The world is making people faster than the food to feed them, with the global population expected to rise by 2 billion to 9 billion by 2050. That works out to 175,000 new consumers of food a day.

While today's crash certainly makes the grains more attractive, we are not there yet. Wait for the dust to settle from this current move before contemplating a buy.

Do I hear a Bid?

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