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06/09/2010 12:12:30
The funds are back...
The market lifted in the last couple of days of June, and continued without a breather until the 5th of August.
The market initially moved through `fundamentals’ issues relating to the supply and demand of the market, in this case the poor quality of the Russian crop, however the movement was quickly picked up by the funds and speculators. Neither type of trader wants to actually own wheat, they just see it as a means to make money. These traders have software which monitors other markets, which simply put, looks out for significant movements in any stock or commodity traded in a number of places across the world. As soon as their systems alarm the trader, they make a decision as to whether to get involved in the market.
Speculators and Funds look to make money on the movement of a product, and they do not mind if it moves up or down. The speculators look to make money for themselves or for their employers, whilst the Funds (often Pension Funds) have huge quantities of money to influence markets.
The funds manipulated the market up 3 years ago, and some had their fingers burnt on the way down, but along the way poultry farmers were amongst those who paid the price through rising feed costs. The recent price movements have triggered funds and speculators into our markets, which they had previously found so easy to manipulate. Their influence is much bigger than the domestic grain traders who traditionally are the usual users of futures. The funds move the prices for their own ends, and give the market new life completely unconnected with the fundamentals of supply and demand.
The red vertical line in the section marked Daily Volume, marks the point at which the market started to move. The level of activity (buying and selling of contracts) increased markedly, with some days seeing 10 times the usual amounts of trade. At this point it is clear to see the distorting impact of the funds on the price of wheat.
At some point, when the funds have wrung this market dry, they will move on, and again let the farmers pick up the pieces.
When that will be is another question..........
The market initially moved through `fundamentals’ issues relating to the supply and demand of the market, in this case the poor quality of the Russian crop, however the movement was quickly picked up by the funds and speculators. Neither type of trader wants to actually own wheat, they just see it as a means to make money. These traders have software which monitors other markets, which simply put, looks out for significant movements in any stock or commodity traded in a number of places across the world. As soon as their systems alarm the trader, they make a decision as to whether to get involved in the market.
Speculators and Funds look to make money on the movement of a product, and they do not mind if it moves up or down. The speculators look to make money for themselves or for their employers, whilst the Funds (often Pension Funds) have huge quantities of money to influence markets.
The funds manipulated the market up 3 years ago, and some had their fingers burnt on the way down, but along the way poultry farmers were amongst those who paid the price through rising feed costs. The recent price movements have triggered funds and speculators into our markets, which they had previously found so easy to manipulate. Their influence is much bigger than the domestic grain traders who traditionally are the usual users of futures. The funds move the prices for their own ends, and give the market new life completely unconnected with the fundamentals of supply and demand.
The red vertical line in the section marked Daily Volume, marks the point at which the market started to move. The level of activity (buying and selling of contracts) increased markedly, with some days seeing 10 times the usual amounts of trade. At this point it is clear to see the distorting impact of the funds on the price of wheat.
At some point, when the funds have wrung this market dry, they will move on, and again let the farmers pick up the pieces.
When that will be is another question..........
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