Is Today The Day We Crash And Burn?

There were no real signs of it in the overnight trade, no huge flashing warnings, just corn down 3c or so and wheat and beans mixed.

Crude oil is a dollar or so easier, but hey we're cruising on nicely upwards in general so what's the worry?

Well, first off we've got corn struggling to break USD5/bushel even though every man and his dog knows for a fact that the USDA's 162.5bpa yield is pie in the sky. If everybody is so convinced then what the problem getting up above five bucks? Maybe it's because the last time it hit five dollars (Oct 2008) it did nothing but go down afterwards?

As Duane Lowry says on Farm Assist: "the market is capable of extending beyond what is a reasonable price and once it determines it was unreasonable, we don't go back to it."

If you fancy another reason why this market is overdue a correction then take a look at how far up we've come in a short time. Take a look at today's USDA weekly export sales, particularly for wheat and note the cancellations to Egypt and the minus sign in front of sales for 2011/12.

Then pop over to have a look at the record spec length in corn, and imagine the scramble for the exit door as and when this market does start to turn.

Then ask yourself if current price levels are really justified. Wheat isn't really that much in short supply is it? The only thing in short supply is the volume of seed to fuel farmers' appetites to plant loads more of it this time round.

And where have all the buyers gone suddenly? The phones have gone eerily quiet.

In the UK, the Farmers' Weekly report that deadweight pig prices fell for the tenth consecutive week last week, whilst deadweight cattle prices are at their lowest since August 2008 as livestock farmers liquidate their stock.

Apart from the ethanol and bioethanol refineries, the other real mouths to feed seem to be leaving the building.

Yet again the activity of fund money has created a two-headed monster. Stories are circulating of elevators in the US who don't want to take delivery of wheat in case it is committed to futures and sits there unmoved for months whilst the funds swap pieces of paper with each other.

So the elevators will only offer very low prices for wheat, in the hope that they don't get booked. US farmers are up in arms that they can't sell their wheat at the "shop window" prices they see on the exchange. KCBT are the latest to come under fire from the CFTC for the lack of convergence with the cash market.

It would seem that few, if any, lessons have been learnt from 2008.