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Rich Posson: Milk and grain
Production remains a strong fundamental, for the milk market. There is aggressive productivity, while demand catches up to supply with an improving US economy.
My research suggests since 1968, on a monthly basis, milk price versus production is of a positive correlation. If one plots a trend of price and production since the 1930s, both trend higher. With the nation's economy and population at net growth for the history of the nation, the US pays up to maintain production, and so, sharp price declines from high production news are actually the smaller of long term trends.
The model is bullish milk until 2012 with an objective of $23 to $25. Feed
The model forecast allows for a good grain crop with possibility for corn to trade as low as $5, but the preferred forecast from a combination of technical and fundamental factors, with an overbearing cyclical bias, that calls for a significant crop problem this year, with potential for $9 to $12 corn, 2011 to 2012.
The crop event would be on time relative a cycle that offers the second largest production problem in one's life time, but a delay is allowed, but unlike the analytical techniques of others, there is a dead line and when one can not blame human error.
I think this means that I have more mature concept of how markets and life tick. A nearby forecast correctly called an intermediate intra-year trend-top for corn and other commodities near the March high and before the collapse. The model is bearish to end-of-month reports, with chance corn bottoms after the report and after beans. The corn bull market could stall out until June, but I doubt it.
Last year, I made a model based forecast for $108 crude oil for 2011, and in recent weeks, my spot chart came within cents of that objective, and then oil sold off. The objective was met (close enough), but well ahead of cyclical timing structure, suggesting the objective was too low. Relative larger model cyclical trends, oil should return to $120s to a slight new record high by 2012.
Although I have made trades along the way and relative a variety of programs, in general, I have been bullish since early 2009 for the US and for some international markets and since late 2008. Late 2008, I purchased Brazil, China and Russia ETFs and still hold these and with 2008 to late February 2011 performance of +80% to +190%.
DOW stock index BC1 program performance.
Sold 8/19/10 (10255) for a gain from previous purchase 7/8/10 (9953). Purchased 9/3/10 (10443) for a loss if from a short sale or opportunity cost (from hedge), and sold 3/9/11 (12200) for a gain. (Following the more important intra year model trends, L1/L2.) The model seeks a bottom near end of March to early April and relative still larger trends, the model opinion is bullish to 2012 with potential for complete recovery.
I have been bullish the economy and from relative model research and from 2009, and it now seems there is frequent evidence to support such an opinion. The model forecasts an improving economy into 2012, perhaps through 2012.
The model in general is bullish commodities to 2012, perhaps for some until 2013, with large corrections along the way (feasible). A commodity alternative investment program was off by half a per cent for 2009, up 28 percent 2010, and up nearly 40% for late February ytd/2011. Curiosities
Late 2010, I was interviewed by two separate movie producers in regards to my thoughts of the markets and economy. At least one of them was quite familiar with my research, offered congratulations and stated he found it assuring as to how comfortable I was with model forecasts, bizarre or not, right or not.
I am not sure where this may lead if anywhere, but I would like to consult others on issues well beyond markets. I am in a mood to assume most of what man thinks about most everything is at best some what right. Next 20 years will be very interesting and I will have something to say about it.
Rich Posson, Ag Financial Strategies dairy analyst, is a contributor for Agriculture.com