The path of least resistance right now for these grain markets seems to be to the downside.
That has more than a few analysts shaking their heads, and maybe going a little gray from all the volatility and the stress.
Chip Flory, host of AgriTalk, says that there’s all sorts of wild things happening — you’ve got new shorts in the market and new longs coming into the market at the same time.
These markets are being driven by emotion, fear, and confusion, and it’s really amped up that VIX (the volatility index, for those wondering), and that’s being reflected in escalated option premiums out there.
“One of the things that I love about volatility in a market, especially when you’re at an already high price, is that you can be pretty passive in taking action, put price orders in above the market…if you’ve got an order sitting there and waiting for that price to be hit. So you’ve got to take some aggressiveness, some action, to get those orders in place. But once you’ve got them in place, then just leave them and let the market work. That’s about as passive a marketing plan as you can you can do in in this type of a market,” he says. (story continues below interview)
“What a study we can get from just looking at December corn futures from first day on the board until what will eventually be the last day on the board,” Flory says. The contract has more than doubled in price, gave 50 per cent of that back, then rallied and gave all that back. “And here we are sitting in the middle of July, with a hot and dry weather forecast, and the market that seems to have decided that the path of least resistance is to the downside.”