A Macro View
I have spent the last few days in Baltimore, Maryland, and as such have been re-immersed in US politics, less than two weeks before the presidential elections. And while the USDA Crop Progress Report comes out on Monday, none of the shocks in the markets have lasted for longer than a couple of days. Since I am trading with a longer-than-day-trader strategy, this means my “weekly” (or so) outlook should consider the election more seriously.
Unfortunately, I take a rather cynical view of politics, and don’t anticipate any major changes in governmental policy with any new administration, or any new combination of staff or Congress under a continued Obama administration. I do, however, think policy regarding agricultural subsidies and requirements governing products like biofuel has a major influence on national supply and demand (recognizing in this observation that biofuel and wheat are not close substitutes). Because I anticipate little policy change, I find myself returning to other drivers of price fluctuations, like weather. However, judging from this week’s quick reaction and re-balance from the Ukraine’s trade announcement, even international trade decisions from enormous global producers may not have much effect on Chicago prices.
Taking this macro view may be more in line with my trading style. Therefore, I will hold my general short position in wheat, but I am interested to see what will happen with my spread position, so I will remain patient with that for the rest of this week.