Something happened on the way to parity between the US Dollar and the Euro currency. Amidst the rhetoric of Mario Draghi and his Quantitative Easing forever platform, both the Dollar and the Euro have accumulated record positions among the commercial traders. Given the trend and considerable decline this seems reasonable until the data is actually absorbed consciously and it becomes clear that the record positions in both markets are opposite the trend and bode strongly for this spread to narrow.
The metals markets disappointed in 2014. Global growth concerns weighed on copper and platinum while silver and gold simply appeared to lose interest. There seemed to be little fear of fiat currency defaults in spite of publicly made central bank statements regarding the destruction of certain currency bases in order to spur sovereign inflation levels and stop the downward spiral of disinflation. This week, we’ll take an in depth look at the metal markets and tell you what we think the best play is in this complex.
The all-time high and ensuing fall in cattle prices brought a sigh of relief, as it appeared the cattle top was in. We sincerely thought we saw it coming in June when we discussed the “Beginning of a Cattle Top.” The fundamentals of the increased demand via the global growth of the foreign middle class demographic remains fully in play as well as this year’s supply issues as nothing has occurred on either of these fronts to change the market’s current dynamic. Therefore, the only question to ask going forward this year has been, “How high is high?” Recent action in the live cattle futures spread between the current, October contract and the next active contract in December provides us with some clues as to what’s next.
The soybean versus corn spread has received a great deal of justifiable attention this year and the current spread between the two markets is still near its all time highs. The last statement however, generates as many questions as it answers. We’re going to look at some of the difficulties in quantifying this spread trade, place it in its historical context and walk through the math so that the next time someone mentions this, you can determine if they’re comparing current crop soybeans versus corn or, if they might as well be talking about apples and oranges.