Tag: Kottke
Kottke Commodities – U.S. Crops, World Demand Both Probable Records
July is the make-or-break month for U.S. corn, as well as immediately ahead of the counterpart period for soybeans. After burgeoning world demand stripped the big South American soybean crop bare in only five months, and Brazil’s corn production shrank, the consequences of a merely modest problem in the U.S. harvest would have been extremely serious. Widespread publicity of “La Nina,” an unusual eastward shift of warm water in the Pacific Ocean associated with poor growing conditions inNorth America, had the world food market particularly on edge. Prices of both corn and soybeans rose sharply in June in apprehension of widely-forecast hot and dry weather during the crucial months to come.
Kottke Commodities – A Half-Empty or Half-Full Glass?
We know of very few commercial entities or traders that were positioned last month to reflect much possibility that soybean prices at CME might be far too low. Plenty of different explanations have been offered as to the source of last month’s abrupt price explosion of grains and oilseeds prices. These can be roughly divided into two groups, “game theorists” and “statistical analysts.”
Kottke Commodities – Little U.S. Business in Wake of Flood Rally
Between late June and end-July, U.S. agricultural prices traced an extraordinarily wide and rapid boom-and-bust, wild even for futures markets. The managers felt well-positioned in corn bullspreads, which did little despite the sharp changes in expectations for supply tightness; apparently it all occurred so fast that the commercial grain business was too frozen to assess and re-position. As December corn rose 90c per bushel in reaction to widespread flooding east of the Mississippi River, and then, après deluge, abruptly fell back 75c, the December-March spread narrowed only a scant 2c and then reversed by as much. The result was a crummy month for us.
Cattle: Futures Commentary
Bulls had something to cheer about to finish off last week’s trading in the Cattle markets after Thursday’s limit higher move followed by a $2-3 rally on Friday. However, the Friday afternoon USDA news was somewhat of a letdown, with the choice beef cutout coming in off $3.02 and the monthly COF (Cattle on Feed) […]
Still Neutral Sugar
Sugar #11- May15 Futures – In yesterday’s trading session Sugar future values were strongly influenced by the exchange rate movement in Brazil. This is the first time since March of 2004 that the dollar quote fell below $3, closing at R$2.967 (-1.3%).
Kottke Commodities – Market is Pricing Political Risk on the Horizon
Surprisingly strong grain and oilseed prices in recent months bring to mind a joke: One man inquires of another, who’s on hands and knees beneath a streetlight, “Have you lost something?” to which is answered, “My contact lens.” “Where did you lose it?” asks the one. “Over there,” responds the prone, while pointing afar. “Then why are you looking here?” “Because the light’s better.”
Kottke Commodities – Soybean Demand, not Farmer Holding, Generated Rally
Those of a certain age will remember the “gas crisis” of the 1970’s, when prices at the pump shot to record highs felt keenly in the economy and individual households. Subsequent statistics revealed no decline in imports, domestic production, or refinery run times, i.e., no supply reduction had occurred. It was demand that went wild, touched off by panic over statements out of would-be monopolist OPEC. A substantial percentage of motorists simultaneously acted to keep tanks topped up as security, abruptly increasing purchases to a record peak that could not be met. What seemed prosaic to individuals purchasing an additional five gallons per week was collectively a sudden, vast increase in demand far out of proportion to actual miles driven. Gas lines extended for blocks and media coverage fed the impression of a crisis which drove more to the pumps. Congressmen were quick to decry oil-company gouging, point fingers at speculators, and convene official investigations thereto.
Kottke Associates – Conventional Wisdom of Supply Bearishness Upended
This fall – the initial quarter of the 2014-15 crop year – has seen more extraordinary and “record” supply/demand events in more separate categories than any such period in memory. Soybeans left over from the previous year’s crop had dwindled to the tightest availability ever relative to pace of usage, followed by the largest soybean and corn crops in history, generating export business in the largest volume of soybean-equivalent (i.e., including soymeal) in history, resulting in the largest U.S. soybean export-loading week in history – to name just a few.
Kottke Associates – As Grain Prices Fall, Shipping Costs Alter Outlook
Grain and oilseeds prices continue an abrupt transition from high-priced relative famine of the last five years to a low-price feast of plentiful supply. Farmers who did not prudently hedge before the big decline would say “overly plentiful,” but government subsidies will restore much of that. Recent years of demand growth undeterred by high prices had encouraged every farmer to plant and fertilize more, followed by Northern Hemisphere weather rivaling perfect greenhouse conditions. The result is the spectacular yields that high-tech seed companies advertised.
Kottke Associates – It’s The Weather, Stupid
August trading results improved markedly as one of the metrics with which we track ourselves, the ratio of winning trades to losers, rose dramatically. Summer crop development was uncharacteristically dull, with unchanging, uncannily positive growing conditions. Since we refrain from exposing investor capital to weather forecasts anyway, we trained our attention on the wheat crops already harvested and the old-crop soybean market still working out its supply tightness.
Wheat Class Substitution Fuels Arbitrage
The sweeping nature of this summer’s price declines in grains and oilseeds has at every moment been dependent on unusual season-long consistency of rainfall and below-average temperatures. Owing to many years of observing sudden weather changes generate wrenching turnarounds in direction of futures, the managers felt that committing to price direction was tantamount to forecasting weather. Monthly returns remained flat, but the two successful trades were strategies formulated to end-run weather risk.
Kottke Commodities – A Sea Change in World Grain Prices
After persistent rain-delayed spring planting, a clearing window allowed its completion – and consistently excellent crop-development weather has prevailed since. On May 18 U.S. planting was decidedly behind average pace, verging on price bullishness, but only a week later it had leapt ahead. About 90% of the Corn Belt received normal to above-average spring rainfall, which together with moderate temperatures has supercharged growth progress. The result is no less than a sea change in prices which have been kept high in recent years by harvests lagging amid demand growth.
Third Annual Managed Futures Pinnacle Awards
Last night was the 3rd annual Managed Futures Pinnacle Awards hosted by CME Group and Barclay Hedge. The event was supported by many of the industry brokerage firms and service providers that help comprise the Managed Futures space. The event was exceptional in our opinion as we were able to rub shoulders with industry peers and some of the brightest minds in our industry. We are happy to report that several of the award winners and nominees are managers we have introduced to IASG clients some of which include Esulep, Global Sigma, Four Seasons Commodities, Kottke Commodities, and Tlaloc Capital. Interestingly, we are one of the first allocators to many of the winners as our database keeps us in a great position to identify new talent for our client portfolios. Another benefit of attending this event allows us to uncover other great managers that we will try and learn more about for our clients and onboard into our database.