Brugler: Yeah, the cash market is showing that people are starting to scramble, they're starting to get a little nervous about the inventory, they're nervous about the fact that all the farmers are wanting to store this fall's crop rather than sell it. That has caused some of the soybean processors to have to push their bids in order to get beans in at harvest, that is certainly not a normal phenomenon. You've also seen some of the elevators having to push for corn because they already had a train booked and now the corn is not in. Now, wet weather in the Corn Belt has slowed harvest a little bit. That has aggravated that situation. But it does concern me that everyone has got this bullish cast on store it and it will get better and usually the market finds a way to try to discourage that. It may be that we'll get a little rally here around harvest time and then sell it off after harvest to try and convince people that they were wrong and they shouldn't store it. The market just doesn't make it that easy to just sit back, store it and make money.
Pearson: What about -- there's been a lot of new blood in 2006 that have entered the pits of Chicago in the form of index funds, pools of dollars coming in that we haven't had before. It's had a very bullish impact. How are those funds doing?
Brugler: Well, they've taken quite a bath. I think the front page news has been Amaranth advisors and how they lost 6 billion dollars in natural gas but those energy losses were spread out over a lot of other traders, a lot of the index funds own baskets of commodities and include the agriculture commodities and the energies, the Goldman Sachs Index, the CRB Index, those were all down for the year. And that is probably going to discourage the asset allocators from putting more money into commodities at this point in time. They're going to look at what they've lost in the second or third quarter, a few of them will scale down but I think as we go into the fourth quarter on Monday I think we're not going to see as much new money coming in this quarter as we saw in the last couple of quarters just because the managers are going to say let's sit back and see where this thing is going.
Pearson: And it's also interesting to see that -- I had one of your colleagues point out to me that these traders and these funds, they're a lot more deep pocketed. We've had a lot of people come into the commodity markets over the years and want to make a killing. These guys do have deeper pockets than most of those. They can withstand, they've withstood what has happened so far this year.
Brugler: Yes, and in fact many of the funds are set up because of the carries in the market. They are fighting against that trend the whole time and they basically have to wait it out with their deep pockets until the overall price trend in the market goes their way. They've been able to do that with the exception of this fall in the energies. So, I think the hedge funds, the ones that are willing to get in and out or trade the long side and the short side, they are going to play a long grain position this winter. They know that the market has got it good for acreage. They'll take a long position and add to it and probably put more money into it than we're used to seeing. We're seeing record volume in open interest in wheat as an example.
Pearson: Yeah, very volatile week there and really a week that really didn't have all that much -- I mean, the harvest is done in wheat.
Brugler: Yeah, the supply side of the U.S. wheat crop is already known, it's how we're going to ration demand over the winter and how much acreage we can attract for next year. But everybody knows world wheat stocks are the tightest as a percentage of use since the early 70's and the speculative community wants to play that.
Pearson: Bottom line, plenty of volatility on the futures front but also producers need to be very cautious of what is happening in their local cash market.
Brugler: Yes, price opportunities, the cash is the place you actually have to live but, again, the board may give you bigger opportunities to make money if you're on the right side than the cash will.
Pearson: Alright, and on the show you said you're not in a hurry to sell '07 corn, beans or anything else.
Brugler: Not in a hurry.
Pearson: Okay, alright, it's going to be an interesting year. Alan Brugler, as usual, appreciate your insights and thoughts. From all of us here on Market to Market, I'm Mark Pearson, thanks for being with us here on Market Plus. Have a great week.