- New Science in old markets -

Bottom extensions in grains

There have been some bottom extensions in some of the main agricultural commodities, both at a weekly scale:

Corn, Wheat, Cotton wkly btm exts

And at a daily scale too:

Meal, Beans, Corn dly btm exts

This means that it is likely that the substantial declines that began in May and accelerated with the last USDA report are ending and that some bounces will now occur. We would like to buy some of these but we cannot tell with any certainty which ones are likely to bounce most – bottom extensions signal the end of downtrends, which may then reverse or perhaps merely ‘flatten off’. Some logic may help. Soya products are expensive by any historic measure because of the switch to meat-eating in the increasingly prosperous Asian countries. Soya meal is a preferred feed for livestock, so this is always a candidate when it is time to buy grains as demand increases relentlessly. Buying an already expensive market is not so silly as it may seem as prices that are high have a tendency to go even higher.

Corn is the other ‘buy’ candidate for opposite reasons – it is now (relatively) cheap despite steady demand coming from syrup and ethanol manufacture, and its use as feed for US cattle. Cattle prices have been extremely high lately and this is likely to cause an expansion in the size and number of herds and so more demand for feed.

In truth we don’t know which to recommend as all have potential to rise from here. Our standout favourite is Soya meal.