Special Grain Report-Hyper Bearish Soybean complex

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$\ Special Grain Report-Hyper Bearish Soybean complex Growing Financial Success Contents CCI Spot Index The bear market in overall commodities that began in March 2011 continues unabated and I see$ Shawn Hackett, President 9259 Equus Circle Boynton Beach, FL 33472 (888) 535-5525 Email: Shawn@HackettAdvisors.com www.hackettadvisors.com Subscription Rate is $300 a year for 24 issues.

Shawn Hackett, President 9259 Equus Circle Boynton Beach, FL 33472 (888) 535-5525 Email: Shawn@HackettAdvisors.com www.hackettadvisors.com Subscription Rate is $300 a year for 24 issues.

com My forecast for overall commodities has been and continues to be that a final hard down phase would occur in the late spring/early summer timeframe to reach the major downside objective of 500 on

1 \ Special Grain Report-Hyper Bearish Soybean complex Growing Financial Success Contents CCI Spot Index The bear market in overall commodities that began in March 2011 continues unabated and I see nothing yet to suggest that we are at a bottom. I fully expect another waterfall decline to take the CCI to the 500 area. Published By Hackett Financial Advisors, Inc. Shawn Hackett, President 9259 Equus Circle Boynton Beach, FL (888) Shawn@HackettAdvisors.com Subscription Rate is $300 a year for 24 issues. To subscribe, please contact us via or phone or register on our website. My forecast for overall commodities has been and continues to be that a final hard down phase would occur in the late spring/early summer timeframe to reach the major downside objective of 500 on the CCI which would be a 26% decline from peak to trough and is exactly what I had forecasted as far back as March This final hard down phase will usher in another surge in the U.S. Dollar to test the double top that was set in the 2009 and the 2010 interim tops near 90. As I have warned about repeatedly in past reports, the basis for this final hard down phase in overall commodities would be the sobering recognition of a hard landing in China. That recognition has begun to sink in but it has not yet reached the saturation point. There will be no bull market in commodities until the China recession has been fully realized. Also those that continue to harp on QE 3 being right Page 1 of 19

2 around the corner are simply drinking too much of their own cool aid and are in complete denial of the strengthening deflationary forces gripping the world at this time. QE 3 is coming but only after a major summer schism in financial markets gives the Federal Reserve the cover to launch another round desperate money printing. U.S. Dollar Index Spot Futures Price Chart The U.S Dollar continues to coil for another surge up in value. Anyone who thinks that a strong U.S. Dollar will be good for commodity markets and the stock market is in complete denial of the interconnectivity of the global economy. Ain t gonna happen!! On the next page, I have included a Money Flow chart of net speculative positions for the U.S. Dollar Index. What everyone has to remember about such data is that every market has its own DNA and one needs to understand what that is for the respective markets they are interested in to gain some helpful predictive future price value. For the U.S. Dollar Index speculative net positions tend to reach their peak 3 to 6 months in advance of the corresponding intermediate top for the U.S. Dollar Index. Currently, this Money Flow Indicator topped out on January 27 th This projects a major top in the U.S Dollar by July This is consistent with my forecast for a major bottom in overall commodities by the early summer and the launch of QE 3 by the late summer. Hence, one must remain very cautious near term and let the final chips fall before committing to the long side of most commodity markets. A few more months of patience is required before the ideal time to buy will have arrived. Given the dramatic underperformance of agricultural commodities in relation to the metals/energy complex it is my expectation that the agricultural space will be the place to be when the bottom has finally arrived. Page 2 of 19

3 My favorite commodities in the grains continues to be rice and I have now added Oats to my future buy list and will discuss this market in more detail below. In the SOFT agricultural commodity space coffee and cocoa continue to be my favorites. While in the livestock complex Milk continues to be the one to watch as it remains the ugly duckling of the complex. I encourage all of you to reread the reports that I have written on rice ( ), coffee ( ), cocoa ( ) and Milk ( ). All reports lay out the bull case that continues to ring true to the current behavior of each of these markets. Agricultural commodities have reached new lows relative to the energy/metals complex. This underperformance is nearing an end and should usher in a huge reversal of fortune as we enter CCI/GSCI Price Ratio Page 3 of 19

4 Money Flow Indicator U.S. Dollar Index The Money Flow on the U.S. dollar tends to top out 3 to 6 months in advance of the final top in the U.S. Dollar Index price level. This suggests that a major top in the U.S. Dollar is likely by July mths 3 mths I would like to go over the grain markets in this report which will be followed up by the SOFT s report later this week. Let s get started. All price charts are from Future Source. All long term spread charts are from MRCI. All Money Flow and Relative price Charts are from ShareL. Page 4 of 19

5 Corn prices have been coiling for many months now. Mother Nature will determine the near term direction as it always does during the Pollination stage in June/July. CORN PRICE ANALYSIS The On Balance Volume Money Flow indicator has shown a possible break down of trend line support. This suggests that a breakdown in prices is more favored at this time likely due to better growing conditions this The corn story remains the same as it was back in September 2011 when I called the epic top in corn one day before the actual top occurred with my report dated Old crop corn supplies remain tight but demand destruction has allowed for enough corn to remain in the system until the next crop starts becoming available in August 2012 from the Southern tier states. Even though South America had unfavorable weather, the overall corn production was still an all time record due to large increase in planted acreage. Just about everyone on the galaxy is expecting a weather scare to push corn prices higher and offer a great selling opportunity. While such weather scares are normally a good bet, this might be the year that catches everyone off guard in not having such a weather scare. All we need is a 153 bushel/acre yield to cover demand this year which should not be very hard given the early start to the planting season that is being done in ideal conditions as we speak. While predicting weather is at best a casino activity, the odds strongly favor a more normal yield this year and large surpluses. The most likely scenario is for yields to show up around 158 bushel/acre, given the marginal ground being planted this year, with ending stocks reaching 1.5 billion bushels for Such an outcome would likely produce $4/bushel December 2012 corn futures prices come harvest time. Page 5 of 19

6 The September 2012: December 2012 bear futures corn spread that I have been strongly recommending this year has collapsed as expected and if you still have this spread on at this time I would take profits and move to the sidelines no later than mid May. I am hopeful that a weather scare provides another opportunity to put this spread back on. September 2012: December 2012 Bear Futures Corn Spread This spread has collapsed as expected given the early corn planting progress in the south that will likely offer larger amounts of August/September harvested corn this season than normal. Time to take profits. Page 6 of 19

7 SOYBEAN PRICE ANALYSIS Spot Price Soybean Chart Soybean prices are nearing an epic top that could stand for many years hence. All that is left is to take out all the buy stops above $14.50/bushel and reverse lower for a likely historic crash. Time to cash sell as much as you can. On Balance Volume money flow indicator is nearing major overhead resistance that has called the last three major tops. Soybeans prices are in the same elite price level to sell as corn prices were back in September of On the OBV Money Flow Indicator we are nearing major overhead resistance that has preceded every major top since You can see on the price chart huge overhead resistance at $14.50/bushel. You can bet that whatever bears are left in the soybean market have placed protective buy stop loss orders above this level. I am fully expecting soybean prices to make one final surge higher to take out the $14.50 resistance level, take out all the buy stop orders and then turn violently down to begin what should be a complete crash in prices. My expectation is that this scenario will play out over the next 30 days once soybean planting has been assured. Producers should be selling current prices as aggressively as possible. You are likely staring at the highs for the rest of the year and possibly for the next several years. The fundamentals keep getting more bearish by the day. Reasons to be bearish: Page 7 of 19

8 1) South American crop is likely better than current consensus opinion and will likely need to be raised over the summer as harvest progresses further. 2) Current prices are very attractive and have likely bought back 2 to 3 million acres in the U.S setting up the likelihood for substantial increases in ending stocks for ) Speculative funds own a record amount of futures contracts. In fact they own over 35% of the expected U.S soybean production. Funds rarely stick around for more than 3 months and every single one of these contracts will be given back to the market place come harvest time. I doubt the market will take 1.3 billion bushels of soybeans at $14/bushel. 4) The 20% crash in the Brazilian real and the likelihood for further losses along with the high probability of $4/bushel corn this fall will require far lower U.S. soybean prices to stimulate the needed increase in South American acres. $8/bushel to $10/bushel beans will likely do the trick. 5) Soybean crush margins in Asia are dreadful which will create disappointing U.S. exports from the current torrid set of analyst expectations. We are nearing a major sell signal on Soybeans using this unique Money Flow Indicator that has picked the last two major tops dead on in 2008 and in Time to sell Soybeans aggressively. Page 8 of 19

9 The best way to play this epic bearish situation for soybeans is to put on the January 2013: July 2013 bear futures soybean spread. These deferred spreads rarely stay inverted for very long and tend to offer superior risk/reward ratios than exists with any other trade idea. This soybean bear spread is one of the best trades of the year. I fully expect this spread to crash once planting has been assured. January 2013: July 2013 Bear Futures Spread-Soybeans Page 9 of 19

Absent the disastrous U.S. Soybean crop in 2003, this spread has not shown any ability to move over +40. I see no reason why this spread should not fall back down to parity at minimum by June.

10 Absent the disastrous U.S. Soybean crop in 2003, this spread has not shown any ability to move over +40. I see no reason why this spread should not fall back down to parity at minimum by June. CBOT WHEAT PRICE ANALYSIS CBOT wheat remains in consolidation mode with not much excitement at the moment. Lower global planted acres and record high feed wheat demand will tighten global ending stocks in On Balance Volume showing no signs of life as of yet. Page 10 of 19

11 Relative Value Price Chart- The breaking of the 4 year downtrend line for relative prices suggests a bull market is brewing for CBOT wheat in Wheat: Corn July 2012 bull futures spread This spread remains stuck in a downtrending channel. Time is running out for the upward surge I had been expecting. CBOT wheat is caught between the bearish forces of large global ending stocks and the bullish forces of record feed wheat demand and significant decline in global planted acres. Although significant declines in global ending stocks will provide a building bullish underpinning to the wheat market, it will likely take unfavorable weather somewhere in the world to tip this market into a bull market mode. As such, the downside in this market remains modest as does the upside. Page 11 of 19

12 Have no doubt that the seeds for the next bull market are being sown as we speak but more time will be needed to get CBOT wheat into a more precarious supply side situation. The July 2013 wheat: July 2013 corn bull futures spread is running out of time. With only two months left the odds are increasing that the big upside in this spread that I had thought reasonable and possible may not happen. The spread should be modestly profitable for everyone who put this spread on which is certainly not the worst outcome for sure. I would continue to hold this spread through May to see what happens. Come the end of May this spread should be unwound. Oats Price Analysis Oats Prices remain in consolidation mode. The OBV has not yet broken out. I suspect the April 24 th Canadian planting intentions report could provide a bullish bias to this market. The oats market has found itself in a very bullish position as a result of the meteoric rise in soybean prices. The U.S. does not grow many Oats anymore so the driver for the Oats market is Canadian production. In Canada they do not grow soybeans but instead grow Canola which trades along with soybeans. Canola prices have skyrocketed in Canada and have caused a major shifting of acres away from less profitable crops and over to Canola. Page 12 of 19

13 Very high returns on Canola and Barley should attract huge returns away from crops like oats that do not offer any return at current prices. (Strychar) You can see how profitable Canola has become to plant in Canada and you can also see how Oats represents a losing proposition. It does not take a rocket scientist to see that Oats will be the big loser in the acreage battle up in Canada this year leaving it in a very precarious supply side situation. On April 24 th which is this Tuesday, StasCan will release their planting intentions report for Canadian grown crops. I fully expect to see Oats acreage fall well below analysts expectations and lead to an extreme tightening of ending stocks in Canada. Consensus is for 3.4 million acres and I believe the number will likely come in closer to 3 million acres. The ironic feature here is that the last two years oats acreage did not get planted due to very poor wet weather even though economics were good and this year weather is good but the economics are not. The Oats market will be looking at a 4 th year in a row of ending stocks decline that will take supplies to razor thin levels even if weather is good. Remember Oats demand comes mainly from human food consumption and feed for horses. Both metrics are at levels that are stable and in fact growth has been seen in the human consumption market given the low cost price point for oats foods in family budgets. With demand on the rise and supplies continuing to shrink something has to give here folks. Page 13 of 19

14 Demand growing steadily over last two years from human consumption. (Strychar) Canadian ending stocks continue to head south. There is no room for a bad crop in 2012 (Strychar) Page 14 of 19

15 The best way to play this bullish supply/demand equation for Oats against a bearish macro picture is the use of bull futures spreads. In this case, I would put on a July 2012: September 2012 bull futures oats spread. The spread has been straddling parity and has a history of going to +30 in years of tight supplies and even as high as +60 in a few years. The Canadian planting intentions report on Tuesday could really set this spread off to the upside if it is as bullish as I suspect it will be. The risk versus reward on the spread looks fantastic as we are near trend line support. A megaphone pattern has developed. Very bullish. July 2013: September 2013 Bull Futures Oats spread Page 15 of 19

16 Rice Price Analysis Rice prices continue to strengthen with the OBV surging to new highs. Very bullish. The planting intentions report in March set the first of a series of bullish developments in the rice market. The USDA planting intentions survey report came in at 2.56 million acres which was lower than last year s 2.65 and at a 40 year low. The problem is that this number is still not low enough. Come the June USDA planted acreage report, the number is almost certain to drop further to a more likely 2.4 million acres. If we assume low end demand side figures over the last decade and apply them to what 2.4 million acres would produce, U.S. total rice ending stocks would fall to under 5% from 17% last year. This is assuming a good crop!!!! This would be some of the tightest U.S. supplies in 40 years. What if the Chinese start buying U.S rice? You can see the powder keg that is the U.S. rice market. I continue to expect that the Chinese protocol for buying U.S. rice will be finalized by June This will be a huge catalyst for the rice market. To add insult to injury the Brazilian rice production this year that is being harvested is likely to fall 20% from last year due to poor weather and lower planted acres. High quality rice supplies in the America s are going to be razor think to non-existent. Page 16 of 19

17 On a broader perspective, the Chinese are buying rice like crazy as they sense the realization of the long term domestic acreage and production decline for Rice domestically to be irreversible. They are expected to import 2mmt in Unheard of!!! Chinese rice prices continue to rise and are now pushing north of $19/hwt. Rice prices as result of this bullish outlook have been able to rise and go against the negative macro forces that have been suppressing other commodity markets. Whether this can continue in the face of another hard down phase in overall commodities remains to be seen. Until the dust settles use sell stop orders to minimize risk on straight longs buy I would prefer to bull spread rice with the anticipation of the recognition of very tight supplies to lead to a major inversion of front end rice contracts against deferreds. The July 2012: September 2012 bull futures rice spread is preferred at this time. Consistently this spread has seen in years when rice supplies have become tight given lots of upside to the current -.17 spread level. The current spread is at major support offering a very attractive risk versus reward ratio. Page 17 of 19

18 July 2012: September 2012 Bull futures Rice spread This spread is on the verge of a major breakout If you have any questions about any of the content in this report, please call me at (888) or me at Shawn@HackettAdvisors.com. Thank you for reading and I hope your future investment decisions turn out to be prosperous ones. Best Regards, Shawn Hackett, President Page 18 of 19

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The Hackett Money Flow Commodity Report November 3, 2016

The Hackett Money Flow Commodity Report November 3, 2016 Growing Financial Success CONTENTS The US Dollar Is Setting Up for A major Bull Market Peak In The First Half of 2017 To Set Off a Terminal Bear market Decline. Look For Downside Volatility Into Year End