Market Commentary for June 14, 2019

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

I've only been following the commodity markets since 2012. That was the year of the drought, which broke the night before my first daughter was born (about 5 weeks early). That fall and following we saw corn futures prices in the $8 range. And prices remained above $5 beyond the next season from what I remember. In the last couple years we have sort of seen a stagnant sideways movement in corn roughly in the $3 -$4 range. There has been a lot of talk about being 'overdue' for another drought to push prices back up to more profitable levels. It does not look like that is going to be the case this year. However, those of us newer to these markets are learning that cool and wet springs could impact planting enough to have similar supply reductions as we saw in 2012 which could trigger prices at levels we have not seen in a few years.

Technical Analysis 




From a technical perspective looking back at the last couple of weeks we have seen the RSI reach overbought levels and a bullish crossover in the MACD. As of the last market close the RSI was over 70 and after some convergence in the MACD it looks like it remains bullish. And prices are well above the 20,50, and 90 day moving averages. Not shown is the volume, but it has been tracking right along with the rise in prices. Technically this market is hot and may get hotter.

Fundamental Analysis

While technical signals might give an overbought signal on a short term basis, the fundamentals could support strengthening at lease over the mid term through the harvest season as we learn just how much of the late planting will turn into a crop that faces heat stress during the summer and delayed harvesting issues in the fall. In the latest USDA WASDE report total harvested acres and national average yield was reduced. Recently some analysts have even entertained the notion of $10 corn. Really? I thought. So I plugged the latest numbers into my balance sheet and my very crude model for December corn futures to see what I would get.

(abridged USDA June WASDE numbers)

	June WASDE	Bullish Projections
Supply:
Planted Acreage (million acres)	90	86
Harvested Acreage	82	75
Yield (Bushels/Acre)	166	166
Beginning Stocks (million bushels)	2,195	2,195
Total Production	13,670	12,450
Imports	35	35
Total Supply	15,900	14,680
Total Consumption	14,250	14,250
Ending Stocks (million bushels)	1,650	430
Stocks to Use	11.58%	3.02%
Model Projected Price:	$4.23	$11.32

My model is based on some of the work by Scott Irwin and Darrell Good at U of I, but very loosely. I only used about 5 years of data and did not have the correction factors for weak or strong demand. But at least for the last year it has served as a good barometer at least directionally for corn prices. Based on the current WASDE numbers its a bit short of where December futures closed ($4.63). But if we plug in the very bullish harvested acres numbers that are being thrown around $10 corn definitely looks like at least an upper bound based on my model. The market is somewhere between my model's projections going off of the WASDE numbers and something a bit more bullish.

We always hear about late planting and how its going to hurt yields, and how a hot or dry streak through the summer is going to hurt pollination etc. and modern genetics seem to fool us by the time we get the final numbers on national yield (at least for the short time I have been following the market). But this year might really be different.

References:

Irwin, S. and D. Good. "New Corn and Soybean Pricing Models and World Stocks-to-Use Ratios." farmdoc daily (6):99, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, May 25, 2016. Link: https://farmdocdaily.illinois.edu/2016/05/new-corn-and-soybean-pricing-models.html

Is $10 Corn a Possibility??? The Van Trump Report. June 13, 2019. https://www.vantrumpreport.com/why-i-remain-bullish-corn/?loggedout=true

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Market Commentary for December Futures (October 12, 2018)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Previously my fundamental analysis and model price projection was at least tracking well with December futures, with some differences most likely due to the simple model and inability to account for uncertainty around trade policy.

(September Model Projections)

(October Model Projections-Update)

But after this last WASDE report my model is showing greater divergence. Things not accounted for in the model in the last few weeks include marginal improvements in trade talk, possibilities of expanded year round ethanol, and wet weather impacts delaying harvest. There are also a few word of mouth reports out there that some farmers aren't seeing the yields quite expected. Technically, by the close of trade on Friday there were some promising signals. Since my last update we've seen positive crossover in the MACD and continuing momentum there, as well as a closing price at the end of the week of 3.73 above the 20, 50, and 90 day moving averages. The close on the preceding day which was report day (October 11) at 3.69 was above both the 20 and 50 day moving average. We will have to see if this momentum continues through the week next week although the RSI is sitting over 60 indicating corn could be a bit overbought.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Market Commentary for December Corn Futures (9/24/18)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Fundamental Analysis

Tracking the last three WASDE reports I have taken a look at my previous model projections and the impact on December corn futures below. While there is definitely a gap (I'm persistently higher than the futures price in my projections) between my model projections and actual December futures prices around the report date, the directional trends are not far off. I would explain a large part of the difference by poor model fit to my simple model having omitted lots of fundamental variables and effects as well as any impact that the tariffs may be having on soybeans pulling down corn.

Technical Analysis

Technically, it is an understatement to say that the September 12 report was a bad day for corn markets. The increase in national average yield to 181.3 bushels per acre brought prices down. The RSI and the MACD reflecting the downward momentum.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Market Commentary for December Corn Futures (6JUL18)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

As of Friday most analysts are proclaiming the start of a trade war. The market's reaction was not that dramatic, and we know with regard to corn, China is not a huge player when it comes to our exports and a lot of trade expectations are likely baked in at this point. Or are they?

When we look at corn we see a continuing decline in the daily chart...although not as steep as we have seen before.

In my last post I discussed the planted acres report and price scenarios (based on my simple model) assuming USDA's projected yield of 174 acres and the slight increase in acres. And I wondered how much trade worries could explain any of the impact on prices. Given China's minimal role in exports (not to reject spillover effects from other markets) if I take my basic model and project prices based on a number of potential yield scenarios it starts to look like what we are seeing on the board and in the charts could largely be explained by big yield expectations.

Yield Stocks to Use Model Projected Price

174                 11.99% 4.14

176                 13.11% 3.94

178                 14.23% 3.76

180                 15.35% 3.61

*Corn Price = a + b (1/Stocks-Use Ratio)

Informa economics reported an expected yield estimate around 176 bushels recently. Other analysts could be making a higher guess. We did see some daytime heat and warm nighttime temps this last week as a record portion of the corn crop is silking at this time. One thing that always surprises us is how robust modern genetics and varieties enable corn to pull through almost contrary to what crop ratings say. Recall last year based on conditions, ratings, and other factors analysts were for a long time thinking about 168 bushel yields and we ended up at 177. All of these factors make a December corn price near or above $4.00 seem like a stretch at this point based on a simple model with yields anywhere north of 176.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Tariffs and Market Response for CZ2018 Futures

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Take a look at the CZ2018 futures contract for the last few weeks and you'll feel you stomach drop.

WASDE June 12 / Planted Acres Report June 29 (summary)

Supply:
Planted Acreage (million acres):  88/89.1
Harvested Acreage: 80.7/81.7
Yield (Bushels/Acre): 174/174

Ending Stocks (million bushels): 1,577/1753
Ending Stocks/Total Consumption (%): 10.79%/11.99%

*Model Projected Prices: $4.41/$4.14

*Corn Price = a + b (1/Stocks-Use Ratio)

On Friday June 29 USDA released its planted acres report and increased planted and harvested acres. According to the updated balance sheets, that could have been slightly bearish (see below). This makes you ask a couple questions. 1) how much of this was already priced in and already reflected on the chart 2) how much of the price drop we have seen is due to trade and tariffs?

This is an ongoing question. It looks like whatever the impact, we're beginning to see sideways trading until something major in terms of weather upsets the above normal crop conditions ratings. How exceptional does this have to be to push back against the price headwinds we are getting from talk about tariffs? That is a hard question. Sonny Perdue and folks at USDA are working on it according to this story:

 "Our economists are using formulas and algorithms to determine the elasticity of what that trade disruption is, versus [other] market factors" - Sonny Perdue

from: https://www.morningstar.com/news/dow-jones/TDJNDN_201806269373/grain-highlights-top-stories-of-the-day.print.html 

That would be good to know from a marketing standpoint (how much can we expect weather to impact price vs. a change in the policy environment and how do we hedge against that) and a need to know if they are going to develop a scheme to compensate financial and economic losers in what many think to be an impending trade war. It is just perplexing to me that we are talking about completely changing the market environment for our food supply...including tariffs and to 'correct' those distortions with possible payments, supports, purchases etc. by government. While far from being a truly 'free' market to begin with, this seems like a clumsy step backwards.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Market Analysis June 15, 2018 (Dec 18 Corn)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

A few weeks ago I was looking at the decline in December corn futures and attributed some of the drop to scares related to potential tradewars. Trade wars aside, when you look at the balance sheet after the latest WASDE report nothing substantial changed:

WASDE Estimates for May/June

Supply:
Planted Acreage (million acres):  88/88
Harvested Acreage: 81/81
Yield (Bushels/Acre): 174/174
Beginning Stocks (million bushels):  2,182/2,182
Total Production: 14,040/14,040
Imports: 50/50
Total Supply: 16,272/16,272

Consumption:
Feed and Residual (million bushels):  5,375/5,350
Other Food, Seed, and Industrial: 7,115/7,165
Exports: 2,100/2,100
Total Consumption 14,590/14,615


Ending Stocks (million bushels): 1,682/1,577
Ending Stocks/Total Consumption (%): 11.53%/10.79%

Model Projected Prices: $4.24/$4.41

Using data pulled from past USDA reports and historical December futures prices I developed a model similar to Darrel Good and Scott Irwin predicting price as a function of stocks-to-use ratios:

price = a + b (1/Stocks-Use Ratio)

What we can see from these projections are that the changes in the balance sheet from the May to June WASDE are minimal, and if anything could be trivially bullish with an increase in the projected price. With announcements this week of tariffs by the Trump administration the specter of trade wars at least for the near term is continuing to weigh the markets.

In addition to any loss in demand related to trade, many traders (the funds?) could be also thinking about the compound impact of trade wars in addition to better than expected yields. While I would tend to discount the really great crop ratings reports that have been coming out in the last couple of weeks (because they are so early) you can't discount how resilient modern genetics have been and allowed those 'better than expected' yields the last couple years despite some expectations of yield impacts from stress. 

Ignoring any impact of trade wars on the demand side, it is easy to see what could happen to ending stocks to use and price as the yields tick up. If we were to beat last year's record yields you can really see the price pressure.

Yield Stocks to Use Price

174                  10.8% 4.41

176                  11.91%        4.16

178                  13.01%  3.95

180                  14.12% 3.78

On the technical side, this is playing out on the charts with price falling below the 200 day moving average (blue) for a number of sessions and the 20 day (red) dropping below the 50 day (black) and lots of volume behind this momentum. The MACD mirrors this with no hint of reversing.

What happens next will ultimately depend on how trade issues unfold and how the summer weather impacts pollination and grain fill. One thing to nail down will be actual planted acres to come out at the end of June. It seems like the worst of the trade issues are being priced in now, so as long as planted acres don't surprise us with unexpected increases perhaps a weather issue or trade resolution will create some price bounces as we go through the summer.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Closing Market Analysis June 5, 2018 (Dec 18 Corn)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

This makes the 5th day in a row December corn closed below the 20 day moving average. You might chalk most of this up to the uncertainty over trade talks (read Trump). I have a hunch that there is potential for recovery if this works out but others are having their doubts about when and how that might take place.

Fundamental analysis (trade wars aside) indicate solid support around $4 or higher, but if a trade war does unfold, we might adjust that lower on a fundamental basis. I think recovery (if there is no trade war) will be limited to the extent that corn demand is dampened as a result of the hit that livestock exports and demand for feed takes in all of this. Of course maybe China is leveraging Trump's rhetoric to drive down prices and then come in and buy up cheap grain. No trade war, and both Trump and China win. But that's a stretch.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

December Corn Futures Technical Analysis (April 25, 2018)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

Previously I covered a back of the envelope fundamental picture of the new crop corn market and basically concluded there was strong support around a $4.06 price and potential to go higher depending on final harvested acres and yield. By coincidence, December corn closed that same day around 4.06 and picked up another 6 cents as of this writing.

With the RSI below 70 there is indication that this isn't overbought and the MACD indicates the beginnings of a bullish crossover. Today's movement has been attributed by some to really dry conditions pressuring the Brazillian 2nd crop corn as well as reduction of Chinese tarriffs on grain sorghum.

(Chart and data produced via quantmod and quandl packages in R - See code below)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

Back of Envelope 2018 Corn Balance Sheet and Price Scenarios

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

As planters start to break free of the ice I thought I would spend some time doing some quick and dirty speculating about what the balance sheet for the 2018-19 corn marketing year might look like. Below are projections based on historical data and the most recent prospective plantings report.  USDA will have its projections out in the next report on May 10.

Being adhoc I only projected off of the last three years of data for the key balance sheet items. The idea is to get a rough back of the envelope look at the implications of the major fundamental factors for the fall harvest and price environment using the projected stocks to use ratio.

U.S. Corn Balance Sheet 2018-19 
Projections 
April 24,2018

Supply:
Planted Acreage (million acres) 88
Harvested Acreage* 80.96
Yield (Bushels/Acre)* 173
Beginning Stocks (million bushels)* 1920
Total Production* 14006
Imports* 58
Total Supply 15984

Consumption:
Feed and Residual (million bushels)* 5377
Other Food, Seed, and Industrial 6844
Exports* 2039
Total Consumption 14260


Ending Stocks (million bushels): 1724
Ending Stocks/Total Consumption (%): 12.09%

*based on or derived from recent historical data - will update with better data when available

Given these assumptions, this is a pretty low stocks to use ratio relative to the last couple of years. This is assuming basically trendline yield and planting every acre as expected (which is already 2 million acres fewer than last year).

What are the major threats (bullish factors) at this point? With the historically cold april (the coldest April on record since the late 1800s) there is concern about the impact on yields. Mike Tannura  comments recently on AgWeb:

“You have to start at 1960 when analyzing the U.S. corn crop, because technology was so different prior to then that it’s hard to compare what yields might have done before 1960,” he explained. “Seven [of those 20 coldest Aprils have] occurred since 1960, and of those seven, six had below trend corn yields.”

Tannura was quick to point out that while April weather is typically not the driver of the U.S. corn crop, a cold April leads to later planting which does influence yield.

“Six out of seven times you can’t get back to trend line yields because of it,” he said.

I think it really depends on how late planting interacts with the possibility of heat stress this summer. However one thing we have seen is that with modern planters and GPS we can plant a lot of corn fast. If we get two good weeks the first or 2nd week of May in addition to modern genetics we could still get close to trendline yields unless we get some sever conditions. One thing though, is how much prep work (pre-plant herbicide and fertilizer applications) will get done properly prior to planting and how much of a rush to plant impacts this. Lets look at the impacts of some yield scenarios on implied prices (based on a basic historical regression of prices and stocks to use):

Yield Harvested Acres Stocks to Use Implied Price  Scenario
173            81                                     12.09        3.901        Average Yield Projection
175            81                                     13.32        3.778        Average Yield (2 years)
168            81                                        9.25        4.185        Lowest Yield  (3 years)

If we had significant yield reductions over last year, as low as 2015 levels, estimated stocks to use would be as low as levels seen in 2013 the first year after the 2012 drought.

However, maybe even more likely, if the cold April and late planting ultimately materializes in fewer planted or harvested acres we could see just as drastic of an impact on stocks to use.

Harvested Acreage Yield Stocks to Use  Implied Price
   81                                  173         12.09          3.901
   80                                  173         10.93          4.017
   79                                  173         9.86            4.124


What if we got a slight reduction in both yield and harvested acres?

Harvested Acreage Yield Stocks to Use Implied Price
   80                                  172                10.41           4.069

While this is very quick and dirty (its only based on 3 years of historical data from WASDE reports) its the dynamics (how much the needle moves on price with changes in yield and harvested acres) that are most interesting. This basic analysis definitely seems to provide some fundamental support for the $4.00 range of corn prices we have recently seen with the December 2018 corn contract.

Huge Caveats

So besides the crude estimates on limited data, there are some other factors to consider as well. My model relating stocks to use and price doesn't factor in a number of market factors that could bias these results. I could be underestimating price quite a bit in all of these scenarios. Also, there is a lot of talk from analysts about usage being high and rising. My average estimates on feed and residual use as well as exports could also be leading to higher levels of stock to use making my price projections too low. So in a sense, my projections while providing support for current price levels, could be relatively bearish compared to more realistic numbers. With additional updates and better projections from USDA in the coming weeks these biases should be addressed. Plus, I need to invest some time in more sophisticated price models besides the basic stocks to use regression on extremely short time horizons.

(at the time of writing December 18 corn futures was at $4.0650/bu.)

Additional Readings and References:

Weekly Outlook: Is Corn Setting Up for a Rally?
http://farmdocdaily.illinois.edu/2018/04/is-corn-setting-up-for-a-rally.html 

How Many Days Does It Take to Plant the U.S. Corn Crop?
http://farmdocdaily.illinois.edu/2018/04/how-many-days-does-it-take-to-plant-us-corn-crop.html


This Historically Cold April Might Mean Lower Yields
https://www.agweb.com/article/this-historically-cold-april-might-mean-lower-yields/


***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

2016-17 Corn Marketing Scenario

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

Corn Production 2016-17 Marketing Plan September 23, 2017

A: 9/23/17 Harvested grain previously hedged with December futures at 3.99/bu. Bought back December futures at 3.53 and sold cash (-.25 basis) at 3.28 giving a net price of $3.74/bu

B: Sold December futures at 3.53/bu to hedge next 25% of crop to be repurchased and sold on cash in December.

C: Will store next 12.5% of crop unhedged and priced with a .33/bu cost of carry (to July) and sell on a rally.

this will leave at least a portion of the crop at risk but in a position to take advantage of a rally in the cash or futures market.

D: Will store last 12.5% of crop hedged with a 9/23/17 July futures hedge at 3.81/bu and .33 cost of carry.

Reasoning for Futures Hedges:

Fundamentals: WASDE yield estimates of 169/bu indicates a projected price bottom of 3.36/bu with some analyst projects of 167 bu/acre national average capping the projected price around 3.62. This price range does not indicate huge opportunities for big rallies and some potential risk for more loss of value. 

Technicals: Although there seems to be a slight uptrend toward the fundamental cap around 3.62 in the weekly chart, with ADX < 20, RSI 46 indicating neither overbought or oversold, volume and open interest plunging don't indicate additional momentum for moves higher. The MACD also has been trending bearish. In the monthly chart, for the last 2 years prices have been trading in a channel with support and resistance very close to the fundamental levels of 3.36 and 3.62. 

Given both technical and fundamental indicators aren't reassuring of higher prices + expected post harvest lows, sales and futures hedges + storage made the most sense.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

September 16, 2017 Market Commentary (Corn)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

Back in July I wrote:

"prices picked up through the July 4th holiday (following USDA acreage reports) with a 12 month and year to date high on July 11th at 4.17. Much of this was reaction to weather vs fundamentals in those reports.

However, interest and volume were not at the elevated levels we saw back during the June high of 4.09. Also, the RSI was near 70 on the 10th and 11th approaching levels giving a potential technical indication of being overbought. This of course may just be the kind of volatility we expect in a weather market while  there is probably somewhat firm fundamental support based on the late plantings, replants, and current crop conditions and lack of uniformity in the crop progress across the corn belt compounding the uncertainty about weather."

I'm not a technician but the market has been downhill since then. USDA has continued to release disappointing WASDE reports indicating strong yields despite the early spring fundamentals and crop conditions being less than stellar across key cornbelt states. Current good to excellent ratings for corn are at 61% vs. 74% a year ago. Additionally the crop is behind, with 75% denting vs 81% 2012-16 average and  21% mature vs 31% 2012-16 average.

The latest WASDE report  actually raised the national average corn yield slightly to 169.9 bushels per acre, and based on estimated planted and harvested acres and usage gives an ending stocks to use ratio of about 16.4%. While not a record yield this would be one of the best (2nd best) yields in the last 5 years. Current December futures puts price just above $3.54/bushel with some carry going  into March and May at 3.67/3.75/bu.

Many producers and analysts are having a hard time taking these numbers to the bank. But industry analysts on average are putting yields in the 165-167 bushel range. These alone are not entirely favorable for price conditions.

Year	Stocks to Use	Price	Yield
2012	0.0740774159	6.89	123.1
2013	0.0915712799	4.46	158.1
2014	0.1259092232	3.7	171
2015	0.1271223653	3.61	168.4
2016	0.1873713109	3.45	174.6

My basic projections based on this data implies that to get any where near $4/bu, taking all other USDA estimates on usage and harvested acres, corn yields need to be in the 163-164 bu/acre range. More complicated estimates and some adjustments with the usage numbers may be a little friendlier.

Projected Yield:	169.9	167	163.5
Projected Stocks to Use:	16.40%	14.70%	12.65%
Projected Price:	3.36	3.62	4.04

Things to look forward to might be technical indicators for an upward trend in price, as well as fundamentals related to actual harvested acres and yields once more progress is made in key corn producing states and those on the outlying areas that have seen better crop and growing conditions.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

Can Index Funds Hamper Price Discovery?

There are some concerned that too much money going into ETFs and not enough active investment will cause issues with price discovery.

https://www.wsj.com/articles/worlds-biggest-pension-fund-wants-to-stop-index-trackers-eating-the-economy-1502974668 

Sounds familiar: https://www.wsj.com/articles/welcome-to-the-meat-casino-the-cattle-futures-market-descends-into-chaos-1471475438 

There has

In Praise of Finance, Futures, and Trading

"Finance can be used to achieve some of the greatest challenges that are facing mankind, including things like dealing with cancer, Alzheimer's, energy, all sorts of societal challenges that require large amounts of financing" -Andrew Lo with Barry Ritholtz (Masters in Business podcast).

"No other industry is so fundamentally tied to our human nature. It is creative in the truest sense of the word-by growing plants we create and sustain life. And no other industry ties the global population together so inescapably. All life on earth depends on agriculture, how well we distribute agriculture's products-how well we trade grain-determines how Earth's population gains access to its most fundamental needs." -Elaine Kub, Mastering the Grain Markets

“Reining in speculators seems politically expedient.  But we live in complex times.  Throwing darts becomes perilous when policy makers begin to advocate (and worse yet, actually believe) that speculators should be removed  from ag / food markets.   Such a move would dismantle futures markets.  Imagine what the world might look like a without market liquidity, price discovery and risk mitigation; not to mention the inability to establish pricing plans, attract new capital investment and stimulate innovation across the food business.   The absence of those influences, facilitated by futures markets, would ultimately lead to less food production, availability and security – NOT the other way around.   Taking speculators out of the mix would be devastating.” Dr. Nevil Speer, No Speculators? No thanks!, Drovers Cattle Network Agsight, March 2011