Is Rice the next commodity bull market?

The grain market is certainly the hottest market at present. A weaker US dollar is helping drive prices higher, however there are also strong “fundamentals” at work here that are adding fuel to the bearish-dollar fire., Corn/Wheat/ Soybeans are all trading significantly higher as the drought conditions in southern Russia continue and with little if any prospects of relief in the very near future. Summer crops require rain however, in Russia’s case, and in the case of Kazakhstan and the Ukraine the lack of grain during July has put the summer grain crops there in very real danger.

 China and Canada have a very different problem which is the exact opposite of drought, these two countries have suffered heavy rains in the grain producing regions, which has limited farmer activity or has devastated what was planted. The strange weather patterns have succeeded in tightening world grain supplies. The grain market bears argue that there is a vast supply enough in fact to meet global demand and they are correct, for now. As long as there are no other problems regarding logistics, the industrialised world and I include the 2nd tier nations in this,  will be able to feed themselves. There will not be a famine. However the important point I wish to make is that these reserves will be drawn down, taking the world into 2011 with limited grain reserves and high and rising prices. We initiated long positions in Wheat this week and in Soy Meal Complex 3 weeks ago and we have been paid handsomely for this, which is just as well because the forex market has been using us as a World Wrestling Federation stooge, throwing us all over the place like a rag doll! I’m sure you all are delighted for my recent windfall, however as traders we want information on potential profit making ideas, so what is the next potential bull market?

 Rice, possibly, it has been left on the starting grid as Corn, Wheat and Beans sped off. This got me thinking are the fundamentals of rice so much more bearish that it has been left behind for a very good reason, or could it of simply not been noticed? At this time, I’m not 100% sure, however, what I am sure of is, rice’ is considerably weaker when compared to the other grains and this has our attention.. Rice is a smaller market on the CBOT, but it is a dominant human “feed” grain and we remember the bull market in rice of several years ago, which made what is going on now in Wheat, Corn and Soy Beans, look like small fry. For now we are not interest in taking action until the well defined trend line clearly seen in the chart below is broken but rice is very much in our thoughts for a potential long play.  If you would like to know how we are managing our Wheat and Soy Meal position register here for a 14 day guest pass to the GT members area.