An abundance of drivers influencing the Ag markets. Together the Funds and Commercials create a very liquid environment that trends up, down, or sideways. During certain times of extreme macro and/or fundamental influences their combined forces move away from a market looking for fair value to a market driven by fear. Fear can cause strong trending moves higher and lower. But when the marketplace is severely spooked, the funds and commercials seem to completely leave the markets and can do so for an extended period of time. The 95’ short crop caught a lot of HTA (hedge to arrive) bag holders off guard. The HTA debacle and the Rising US Dollar (dot com bust liquidity drain) spooked the market makers enough to drop Open Interest to a very low area from the late 90’s to mid 2000’s. This created a very unwelcoming market structure for corn trading mostly in the lower $2.00 area. I share this to illustrate just one example of how outside influences greatly affect Ag commodities. I hear a lot about recessions pulling money from stocks and into commodities. Sometimes that is the case, but scared money can sit on the sidelines for some time. Too much is going on in the world and capital flows are abnormal. I don’t know where any of these markets are going but it sure seems that for the moment money is moving to the sidelines in many markets…
