Commodity wrap-up

Learning to Ride the Bear

Our lungs, tides, and markets cannot endure by moving in one direction only. Our bodies would perish, continents would flood, and economies would self-destruct were it not for corrections and cycles creating sustainability or relative stability. A massive move in a single direction is eventually followed by a correction, which can be equally significant. For example, stock market speculators in 1928, 1987, and 2008 discovered an overbought market can become a house of cards and vanish overnight if liquidation begins.

Economists, advisors, and IRA investors question their buy-and-hold mentality and look at bearish strategies, which can be profitable as equities decline. This is precipitated by recent talk of a sharp rise in interest rates, apocalyptic inflation in Great Britain, recession in the U.S., the invasion of Ukraine, economic slowdown in China due to COVID, and devastating water shortages and fires in the U.S. Put options or shorting miniature stock index futures have suddenly become more popular as a way to make money as the Dow, NASDAQ, or S & P decline. As of 1:00 pm Friday, the June mini stock index futures were sharply lower, with the S & P at 3832, the Dow at 30700, and the NASDAQ at 11566.

Wheat and Beans Trading Places

The two fastest moving U.S. crops—wheat and soybeans—switched roles in a counter-intuitive reversal. Wheat got the shaft while beans bounced upward. However, the wheat fundamentals seem to remain quite bullish, with data from the National Association of Wheat Growers tour indicating a dramatic drop in production due mostly to extremely dry weather in the Southwest Planes.

They expect the total bushels of wheat produced to be the worst in 12 years. Soybean acreage should be increased this year due to high fertilizer prices chasing farmers away from planting corn to beans which require pesticide but far less fertilizer. So the wheat market has had a sharp rise compared to beans for months but suddenly, this week, staged a major correction back toward typical.

Near Friday’s close, July Chicago wheat was worth $11.70 per bushel, whereas July beans traded at $17.04, up about 60 cents on the week. July corn, down just a shade, brought $7.79 per bushel. Hogs continued their path toward sharply higher.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.