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| I working with numbers and not yet complete.
The overview:
The grain industry backing away from HTA, due mostly to risk, suggests an overhang of producer selling.
The grain industry is a highly leveraged industry, must report to lenders as do most businesses, and their potential gain is speculation in the basis & like anything else, the rewards are generally limited.
At current price levels, the question to ask??? Is how much demand are we shutting off for next year? And is a question I am looking at right now.
At some equilibrium point, unknown yet, if demand shuts off just slightly, all of these acres may not be required.
At this juncture, I do not envision a massive liquidation of hogs as there are futures premiums in the deferred futures. We are however, liquidating in the short run.
The question in my mind, and do not yet have a comfortable view, is how much of this demand will surface again in 2009?
The next question, in the very short run, PUT YOURSELF IN THE SHOES OF A FUND MANAGER TODAY. Equity markets are tanking around the world....there will be a recovery program, but that involves politics and does not happen overnight, in the meantime, the market marches forward. If these fund managers get cold feet and begin to unwind it could well feed on itself. The sharp fund manager earns income based upon profitability; While he/she may view the fundamentals as very bullish, they must face the reality of the emotions of the public.
Summary: Liquidating livestock means reduced feed demand, ethanol operators squeezed, nervous producers with an overhang above this market all spells to me CAUTION. Personal opinion, these markets need a hard break to be any good 3 months from now.
As the old saying goes, "I was exactly right in my prediction, except I ran out of money and time."
Edited by SeniorCitizen 1/21/2008 11:00
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Short Overview
