The Hueber Report

I have referenced this previously but unfortunately the most positive thing that can be said about the commodity markets right now is that everything and everyone appears bearish. It is almost like the double negative. When two negations show up in the same sentence, it actually points to something that is positive.  It seems that just about every news item that have been published this week so far has been dour and we recognize that managed money is already holding a heavily weighted bearish position so by extension will that mean we could be in line for a rebound?  It would be great if reasoning with markets was so simple but of course in real life, that is not the case.

There were stories of one more victim(s) of the commodity realignment yesterday and that concerned the commodity division at investment bank Morgan Stanley.  Earlier this year the company had already divested its physical oil trading business but will now close up shop on the balance of its commodities division and well as fixed-income division. It is almost ironic that when you have huge inventories to trade that would not coincide with great opportunity for traders but when everyone is battling over a shrinking demand base, there can only be so many in the ring at one time.  Of course in the fixed-income department after a prolonged zero interest rate environment, and I understand their worst quarter for bond trading since the financial meltdown, who needs an entire division?  Companywide they announced layoffs of around 1200 employees yesterday of which 470 will be in the aforementioned divisions. 

In just a few hours we shall see what the USDA has in store for us with the December supply/demand report.  As I have commented previously, December would normally by a non-event but Uncle Sam has been none-to-shy about delivering surprises as of late.  Once again, here are the average estimates for today; Domestic corn ending stocks 1.761 billion bushels, beans 470 million and wheat, 917 million.  For the world numbers the trade is expecting a corn balance of 211.85 MMT, beans of 82.84 and wheat at 226.70.  Realistically there is nothing positive to read into any of those number but unless they were to grow again today, one has to belief that have been well factored into the current price structure.  If we could “hope” for anything today it might be a positive reaction to negative news to confirm the previous statement.

At this point in the morning, commodities in general appear to be witnessing a minor rebound. A soft dollar would appear to be helping.  While this may be little more than a “dead cat” bounce it still could be indicative of the big short position held by the professional spec and the potential they may want to take more money off the table between now and the end of the calendar year.  While that may not offer any extend promise, it could provide producers with another opportunity to sell against strength.