World Grain - December 2016 - 54

FEATURE: BUMPER CROPS, BUT THE WORLD NEEDS THEM

tions in terms of equity prices and we're
getting closer to the period of raising
interest rates, and equity prices don't
do well historically in the face of rising
rates. Commodities may come back to
favor and vogue."
The emphasis for grain prices now is
shifting onto South American weather.

"Record production temporarily brings
about record supply, but the emphasis
is on 'temporary' because we can start
the year with this fear about how high
supply is going to be, and that is eroded
and detracted from because of demand,
because of above expected demand, and
then occasionally we will get a surprise

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weather supply event," he said.
He used base metals as an example
of how commodities prices are trending
upwards.
"Prices are headed higher even without that speculative element," he said.
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their way into these very cheap commodities. Also, we have an incrementally better growth than we had last year.
We are now beginning to see rampant
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going to see negative interest rates go
away. We are going to see the U.S. rates
notched higher. We are going to see that
Southeast Asia impact."
MARKET LOWS ON THE HORIZON
"The grain markets will soon see the
largest production ever in the United
States," he explained. "If we had not
had the slight disruption in Brazilian
and Argentinean production last year,
we could be looking at what could be an
18- to 24-month bear market. But something happened on the way from the
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outshine all expectations. Granted, a lot
of this demand is coming from China.
Granted, the market participants, after
most sales are noted, say 'this cannot
continue.'"
At the time of his presentation,
Hightower believed the grain markets
would reach a major low in the next 60
days.
"How does that low come about?
Well, we raised our ending stocks projection because of what we are producing in the U.S. this year," he said.
"We're done with the U.S. primarily and
we're already looking straight to South
America. We're already seeing an improvement. The areas that were dry have
become wetter. The areas that were wet
have become drier. The amount of production that is anticipated is large."
He focused on the effect of the hog
herd.
"In China that's a very important issue," he said. "Talking to the animal
sciences head in China, he told me that
demand for feed in China will not go

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World Grain - December 2016

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