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Corn and Crude Convergence
Good article on corn this morning by Smart Money Europe (Zero Hedge link).
The bottom line is that corn is sitting at a two year high. Reading SME
you have to conclude there is more on the upside. I’m lifting this chart
from the piece to make a point:
I was looking at this (ugly) chart and realized this was the same chart
for crude. Now look at this chart that compares the two. (Note: I use
Brent as I think WTI is irrelevant)
This chart is truly ugly. Looking at this it hard not to conclude that Corn = Crude as far as directional price moves go. Which is the dog and which is the tail?
I think crude drives corn. It takes a bunch of energy to grow corn
(diesel and fertilizer). There is also the ethanol connection. The
higher the price of gas, the greater the price for ethanol, the greater
the price for corn.
The conclusion is that the dog (crude) is wagging the tail (corn). But that is not what the chart says. Over the past four months corn has outpaced oil. In the past quarter the tail has been wagging that dog.
One of two things will happen. Either corn corrects or crude corrects. My bet? The dog will catch up with the tail. This chart is telling me that $140 Brent is on the way.
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huffy
Brent at 140 and DJ at....? crazy world...the DJ resists everything...showing it belongs to those who are not part of Main street but in a world of their own...Who will drive to work when brent hits 200...?
more parking availability in LA,SF
Don't be obtuse, there won't be any jobs at $200/barrel... ; > )
Rickshaw driver?
"Brent at 140 and DJ at....? crazy world...the DJ resists everything...showing it belongs to those who are not part of Main street but in a world of their own...Who will drive to work when brent hits 200...?"
With ZIRP/QE, investment $$$ have nowhere to go except into nonsensical pyramid schemes. Of course the economy will come to a grinding halt with $5-6gal gas, but that doesn't stop the pump n dump machinists.
Run it up until it can't run up anymore, drown the economy, then drop back and start over. Summer of 2008 redux.
The 1% plutocrats cannot sustain consumption on their own...Who's going to buy all those new Ipads if the economy tanks under the inflation hammer? It'll mean mayhem to their portfolios. It's a lose-lose all the way...no winners under the Oil rise barrel...that's the real killer! But if the US stops it'll cool the oil rise...or will it? That is the big question...Has the world decoupled from a WS assets-USD-US consumption meltdown...?
The 64000 $ question to tell where we stand and if we won't all end up in Armageddon. I don't see China stepping in and Euro zone is not much better...back to 1929!
This is actually 1937 that we traveled to.
It is a lose-lose, but you don't need to concern yourself with that (right now) because it won't happen until some time in the not-so distant future...(possibly tomorrow.)