Cornering in Minneapolis Wheat Market?

[Matt12]

Hi to everybody
I'm italian so excuse me for my bad english.
I'm losing a relevant amount of money in calendar spreads on minneapolis w.
Well fundamentals are strong, supply is tight, etc etc, losing is a part of the game and I'm a fool because I didn't use stop loss.
Forget about that.
I was a child when Hunt Brs caused the famous bubble in Silver, in 1980.
IMHO there is something similar here.
Obviously I have only suspects, but there are many strange facts that happened on Minneapolis W in the last few weeks.
Is it possible that some great hedge funds relized a trust and boosted prices to these incredible levels?
If we talk about fundamentals, Chicago should have followed but we have seen that last week continuous LU were caused to poor traders caught short, who was trying to cover themselves.
Today, in the last few minutes I' ve seen a panic selling of the same poor traders on Chicago.
What do you think about it?

 

[nazzdack]

1) Grains are driven by commercial users, not hedge funds.
2) The wheat contracts have correlated movement most of the time, not all of the time.
3) Raging bull markets don't end calmly and peacefully. They're volatile and wild. It's the opposite compared to the stock market.
4) Barilla pasta used to cost $1 per box. It's now $1.50.

 

[hrokling]

First of all; I'm not in any way in-the-know of what they say on the floor - I don't even pit trade Wheat.

But look at the CBOT-volume - electronic is dominating the floor. I've been watching the price action a lot, and there is obviously a lot of arbitrage between the floor and Globex.

However, I feel pretty certain (this is a hunch, so go ahead and make fun ) that one or more hedgefunds are very active now - and guiding the market. Especially when you consider the new crop there must be something going on. Now, they're not stupid of course - so they're definitely leaning on fundamentals - but somehow the move just feels totally overdone.

The spreads are completely crazy - but the March/May carry seems to be right although it is still volatile. Who bought that spread at -100

 

[Matt12]

Quote from nazzdack:

1) Grains are driven by commercial users, not hedge funds.
2) The wheat contracts have correlated movement most of the time, not all of the time.
3) Raging bull markets don't end calmly and peacefully. They're volatile and wild. It's the opposite compared to the stock market.
4) Barilla pasta used to cost $1 per box. It's now $1.50.

Thank u for answeing.
I agree with points 2,3, and 4.
But if you look at last few weeks' COT, when the raging bull market has spreaded the most power, you can see commercials who sells to large speculators, small speculators getting caught short and open interest falling down.
And, by the way, if grain prices on Minneapolis are driven by commercial users why in the last few months hedge funds has bought such a huge amount of seats in Minneapolis exchange?
Look at Urbana Corporation: they bought 34 seats between July 2007 and last week.
Well we can easily say that there is a great business in seats, their prices have risen incredibly in the last 2 years, much more than grains prices.
But if you make a great deal in seats, you can make a few million dollars profit. There aren't futures in seats...If you are able to corner a market you can make a hundred million dollars profit!
Minn is a thin market compared to Chicago.
Also I must say that recent emergency rules approved by grains Exchanges are crap.
If there isn't a pre-orderred plan to boost and then burn prices, it's quite funny notice that Minn may contract have lost a quarter in the last few seconds while it was LU from 13 until 13:14:50; in fact, if may contract had closed LU limits for today should have been risen to 90c.
March minn contracts traded sinthetically over 21 $ late on Friday, but yesterday's shintetical prices were fallen to 17.50 $.
Maybe today march contract will come back trading.
Have you an idea of how many traders who was suggested to cover themselves with options are gonna burn?
"There is no wheat in Minneapolis, there is no wheat". That was the mediathic boom-boom of the last weeks.
But if Minn march contract come back trading and starts to fall like Chicago, what should we say? Wheat has appeared again misteriously?
I' m very courious to see prices at the FND.

 

[Hook N. Sinker]

Quote from Matt12:

Is it possible that some great hedge funds relized a trust and boosted prices to these incredible levels?

Prices of wheat, corn, soybeans, rice and oats futures are near multiyear high values. I do not know what the fundamental reason is but price values of many agricultural products is increasing. Perhaps the price increase is due to generally inflationary USA government behavior. I suspect hedge funds are following trends as price values increase, not cornering markets.

 

[Matt12]

Quote from Hook N. Sinker:

Prices of wheat, corn, soybeans, rice and oats futures are near multiyear high values. I do not know what the fundamental reason is but price values of many agricultural products is increasing. Perhaps the price increase is due to generally inflationary USA government behavior. I suspect hedge funds are following trends as price values increase, not cornering markets.

You are right.
In 1980 too there were huge inflaction fears..there are no doubts about fundamentals, they are extremely strong on grains and almost all commodities ( except for the ones most related to the economic cycle like lumber ).
IMHO we are going to stagflation, with massive credit crunch and for that reason I'm long on gold and not short on grains, i'm into a calendar spread between march and july minneapolis w.
But this isn't the focus of my thread.
There is something too strange in the last few weeks on minneapolis w, and I want to understand what happened.

 

[Pa(b)st Prime]

It's primarily about the ability to deliver product.

The longs say "give us our wheat." The shorts say "there isn't enough wheat available." Hence shorts as always have two choices. Stay short until notice and deliver or enter the open market and cover.

Are some funds long? Yea. Not many or much. Remember there are speculative position limits of only 1000 contracts.

Like anything else, after the troubled shorts are out the market will fall. Perhaps hard.

I feel your pain. A horrible situation to be in.

 

[Matt12]

Quote from Pa(b)st Prime:

It's primarily about the ability to deliver product.

The longs say "give us our wheat." The shorts say "there isn't enough wheat available." Hence shorts as always have two choices. Stay short until notice and deliver or enter the open market and cover.

Are some funds long? Yea. Not many or much. Remember there are speculative position limits of only 1000 contracts.

Like anything else, after the troubled shorts are out the market will fall. Perhaps hard.

I feel your pain. A horrible situation to be in.

1000 contracts each are not so many if we speak about Chicago, or if we speak about markets without the out-of-date crap rule of limit prices.
Maybe it had some sense when wheat prices were under 6 $,but it was months that limit prices were completely unappropriate.
30 c were too low compared to soyabean and corn for example.
If you have 1) A thin market 2) Limit prices too low , you can handle market with much less contracts then someone can think.
I had warnered some fellow when w prices began to run up that too low limit prices could bring to massive speculative movements expecially in thinner markets.
However, I fell down in the trap like a fool!

 

[enochbenjamin]

In my humble opinion the rules of the game were not set up to favor the small individual trader. Hence you must figure out a way to outfox the fox.

As soon as the announcement came out that the daily limits were being raised your "smells like a rat" nose should have been up in the air sniffling. Sure enough, Sunday night CBOT Wheat went limit up in the first second. After dropping momentarily (to let some more small traders in to be hazed) it returned limit up. Then Monday it proceeds to lose $1.05 from the high!!!! Effectively wiping out the profits of anybody who came late to the party. In one day 3 days worth of gains were erased. Draw your own conclusions...

What does this tell me? Wheat is not for the faint of heart.

Limits rising, margins keep going up... small speculators will not be able to play at all in the near future.

The rules were not designed for the little guy.

As always, just my 2¢

 

[ProfLogic]

Quote from enochbenjamin:

What does this tell me? Wheat is not for the faint of heart.

Limits rising, margins keep going up... small speculators will not be able to play at all in the near future.

The rules were not designed for the little guy.

As always, just my 2¢

Yes & No.

Trading ANY market that is liquid and volitile is not for the faint of heart unless one can read price action and then it's still scary. March eWheat gave us a beautiful confirmation of a top and a short around 10:40 am EST yesterday at US11.4175 a bushel. Price action gave us a current stop just above US$10.1650, locking in US$1.25 profit.

I consider myself a small trader, trading 10-15 lots per contract month. I do think it IS important that traders learn to read price in order to survive in these markets. The old rules don't apply anymore because "in the old days" price action wasn't something a small speculator could read. Today, at least they have the ability to learn.

Oh, your US$.02 is worth US$100.00 per contract. Nothing to sneeze at!