Dan Flynn is the writer of The Corn & Ethanol Report, a daily market letter covering grains, energies, and various global issues that are the driving force and backbone of the commodity markets. Contact Mr. Flynn at (312) 264-4374
The Algorithm and High Frequency Traders are driving commodity hedge funds to throw in the towel, reported by Thomson Reuters. Many commodity hedge fund traders such as Anthony Ward (aka) “Chocfinger”, known for his large bets in Cocoa and Coffee and rather successful argue it is a steady rise and has reached a tipping point that is distorting prices and creating uncertainty not only for investors, but other firms and businesses that rely on commodities to help their balance sheet. Ward was quoted, “It is too big, too quick, too dramatic and completely against the fundamentals.” It really shows that these computers are forcing more liquidity out of the marketplace and the fastest computers survive. I believe it is about time for the exchanges and regulatory bodies look further into this situation for the good of the business. On the Corn front we see a slowing down in Grain complex after yesterday’s firm rally and close led by Soybean Meal which helped spillover to the rest of the complex. We also have weather concerns in South America and here in the U.S. that helped spark the rally. In the overnight electronic session the March Corn is currently trading at 366 ¼ which is ¾ of a cent lower. The trading range has been 366 ¾ to 366.
On the Ethanol front the March contract is currently trading at 1.413 which is .004 of a cent lower. The trading range has been 1.413 to 1.410. The market is currently showing 3 bids @ 1.415 and 2 offers @ 1.419 with 7 contracts traded in the overnight electronic session and Open Interest dropping to 1,042 contracts.
On the Crude Oil front the high frequency traders ran the market lower once again before the 1:30 P.M. close as settlement prices at this time reflect on customer statements the following day driving investors out of the market. This patter has been going on for so long and so obvious and the exchange and regulators should change the settlement to reflect the 4:00 P.M. close to give real fair value. While stocks continued to trade higher and the U.S. dollar lower those markets did not flinch which only tells me what drove the Crude prices down? No News or Fake News. Something is the catalyst in doing this so frequently. In the overnight electronic session the March Crude Oil is currently trading at 5901 which is 28 points lower. The trading range has been 5973 to 5887. At 3:30 P.M. we have the weekly API Energy Stocks and whisper numbers are calling for draws.
On the Natural Gas front we had a Turnaround Tuesday with the March contract currently trading at 2.612 which is 6 cents higher in the overnight electronic session. The trading range has been 2.625 to 2.562. We are moving closer to shoulder season and rallies may be hard to find unless a major arctic blast nobody is forecasting or unless we continue to see inexpensively cheap prices.
Have a Great Trading Day!
Questions? Ask Dan Flynn today at 312-264-4374
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