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How Does the Drought Impact Corn Investments?

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    Steel Vine Investments CIO Spencer Patton on investing in commodities.

  • Duration 4:50
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Heat and drought conditions in the midwest continue to cause corn and soybean prices to so war.

And weather forecasts are predicting dry conditions to continue for another two weeks.

Let's talk an all time highs for some of these prices we have somebody who told you so he says now though is the time to take profits.

Spencer patent founder -- chief investment officer of steel buying investments joining us with his ways.

To now invest in the -- because it's a living breathing moving story day by day let's talk about June 20 you had said.

By corn and buy soy now what do you say.

Right so I think there's a really important concept here that people need to understand with a grain markets that particularly in a weather market when when markets are rallying based upon.

And you've had these markets rally a tremendous amount since I was last on on June 20 yeah and what you're seeing now is when corn is at eight dollars a bushel.

You're seeing ethanol plants completely shut down that that the price once you get corn at this level it's no longer in anywhere near profitable for them to continue.

To demand corn and purchase -- I see you get real demand destruction once you get to these points and you start to get an equilibrium and a stabilization in corn prices.

So all that to say I think the move is probably close to done here.

But that's sad the commodity space I think and other areas can still be attractive one area that I've I've been telling people to take a look at isn't sugar.

Over in India overseeing the monsoon season run 22%.

Below norms once again -- A drought it's a situation in which rain is -- not producing a big enough crop.

Sugar could be the next market that looks like corn and soybeans over the next month.

Wow well again you heard it from this guy before mother that go by the way just it to put a fine point on -- Spencer if folks -- listening on June 20 when you said -- warned.

Should they now sell what they bought in June 20 or should they hold onto it.

I certainly think they should Salomon you see markets that are up 50% from that point and markets are stretched as they have almost ever been when you look at certain metrics -- Bollinger bands and and technical analysis but -- -- -- -- -- -- would you would go back into corn and I'm wondering at what price point you would do that.

Once you can get a 10% haircut and corn I think that you could absolutely go back and buy because the days of five dollar corn for the season are completely over there's been a tremendous amount of damage and corn OK so they say that parabolic moves always end in tears however -- -- throw this issue.

Would you short some of the -- here.

Who that that's so scary for me because I think that there's other opportunities out there I certainly don't know the weather more than anybody else is gonna know what what the weather turns out to be so I wouldn't get in the way of the freight train here I would try to pick on a weaker commodity may -- like copper.

Copper is very dependent upon economic growth worldwide and we're gonna see Europe -- -- a disastrous situation guardian one.

But it's -- it's gonna get worse for seeing that the Euro debt.

Lows that we haven't seen in years.

Congress in China have a tougher economic situation so I would much rather go pick on copper and try to get a a fall down in price there than I would wanna get in the way of the freight train of corn or soybeans here because it's just so powerful -- -- so much devastation when market.

That I I would -- -- stay clear Spencer we just had an analyst on a belief that not only -- things slowing down in China but that we hear are going to be experiencing recession soon.

He's got almost all of his money and either gold stocks or gold bullion.

What about gold itself if -- gonna fall by extension might not gold fault or continue to.

It very well could that thing that scares me about gold is that it's very tied to the US dollar and this crisis as it develops you're going to see it weakening Euro -- a stronger dollar that's the trend that we've seen and when you see a stronger dollar that has -- gold over time.

On top of that the whole reason why gold has even shown a little bit of stability is that everyone is hoping that a third round of quantitative easing is gonna come out of a bad.

And I I really don't think that that's gonna happen that the Fed is not going to be announcing quantitative easing with stock market's pretty close to 2012 highs and and -- only 5% off the highs so I think that gold bulls are setting themselves up for disappointment.

And if you get a combination of the Fed disappointing markets.

And a stronger US dollar.

You could see gold shed 200 dollars -- a -- -- even I was even here even if there is that QE3 bear a lot of people think it won't do much good anyway so -- is the dollar that's -- ride out the dollar might stuff all right well listen thank you very much again you were right on target before.

Let's hope -- right now he he says buy sugar and short copper --

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