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Market Plus: Jan 29, 2010: John Roach

posted on January 29, 2010


Market Plus: Jan 29, 2010: John Roach Pearson: This is the Friday, January 29, 2010 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. With us this week our senior market analyst, John Roach. John, good to have you. You brought up a lot of things on the show and I think one of the more interesting ones we're seeing some effects of this year, we need to invest in some infrastructure in agriculture, bigger crops, more storage handling, movement, the whole thing.

Roach: Absolutely. The idea that we're piling $3 to $4 a bushel corn on the ground and letting it deteriorate doesn't make any sense. Producers need to be talking with the people that they deliver the grain to and look for adequate storage, condo storage, new bins on the farm, get the infrastructure there to handle these bushels because the one thing we know for sure is the numbers of bushels over the next five to ten years they're going to get considerably bigger. And so we need to be preparing for that as we move through the winter.

Roach: Something else that I wanted to talk about on the show that I forgot was what has happened to open interest. A lot of people expected to see the index funds re-allocating their percentages of money between the various commodities that they own. So, we knew they had corn, wheat and beans to buy because they made profits in some of their other marketplaces, energies and precious metals and so forth. But what has been interesting is that when we peaked the market back in the latter part of last year, November, December timeframe, we peaked the open interest. And then open interest, last time I was on the show in early December, the open interest was declining and continued to decline until the end of the December. And every week since then, every week so far this year the open interest has increased in the agriculture commodities.

Roach: As an example, this week we increased the open interest in corn, wheat, beans, oil and meal, we increased it by 55,000 contracts. So, we had 55,000 new contracts purchased this week. The week ended on Tuesday. So, as we've seen the speculative crowds selling out their longs and going short we've seen the index funds, the commercials and the exporters taking everything that was sold and they are very strong hands. So, we think that we want to be careful here looking at this market. We see people becoming negative with this market. We think that we're simply transferring ownership into stronger hands and it's like adding gasoline onto a bonfire that has not started yet. But we're pouring gasoline onto dry tinder that if we catch a spark, we catch something to light this market we have a lot of buyers, we doubt very sellers that are going to be easy to sell.

Pearson: Good point. John Roach, as usual, we appreciate your insights, glad you've joined us for the show this week and, of course, here on Market Plus. For all of us here on Market to Market, I'm Mark Pearson. Thanks for joining us. Have a great week.


Tags: agriculture commodity prices markets news