What Happened To Turnaround Tuesday?

08/03/11 -- There's no sign of it so far. Last night's Chicago market closed sharply lower and those losses have been extended in overnight trade with beans now showing 10/14c easier for a combined decline of 30/40c. Corn is showing combined losses of around 14/15c and wheat in the region of 25/35c lower.

So what's happened to change things? I think that maybe the shake-out that we saw a fortnight ago at least partially shattered spec longs air of total invincibility. Up until then they were convinced to a man that downside risk was negligible and the only way was up. Forever.

Even the freshest-faced fund manager will be able to recall that prices have only been at these levels once before in history. They will also be able to remember what happened then, when the circus pulled out of town.

Just when you're suffering a little crisis of confidence the Food and Agriculture Policy Research Institute (Fapri) rock the boat by predicting that the hot potato that is the US blender's tax credit won't get renewed at the end of the year. As we all probably by now know, the ethanol industry in the US currently gobbles up 35-40% of all US corn production. For the full story on this issue see Agrimony.com.

Should that happen, and it seems more probable than previously given the current House/Senate split, then the corn demand goalposts won't have so much been moved as chopped down and burnt.

Reports on Reuters this morning that Gaddafi may be looking for a way of stepping down as Libyan leader, even though he said last week that he had no position to step down from, has taken the wind out of crude oil's sails too.

Based on what was on the BBC last night his position seems stronger now than it was a week ago, so I wouldn't go counting too many chickens on that front just yet. Even so the uncertainty may be enough to encourage more money to be taken off the tables.

Nymex crude is down a dollar and a half this morning, with Brent around a dollar weaker.