As a result, open interest continues to swell and this morning it measured over 25.1 mio bales, which is rather amazing considering that we are in the midst of the spot month liquidation. Open interest in December '08 and beyond is steadily rising and already approaches 30'000 contracts, which is about two-and-a-half times a much as last season.
As we have mentioned before, we wonder how long the trade can hold against this steady influx of spec and investment money. With open interest already about 1.4 times bigger than this year's US crop, there has to be a limit as to how many shorts the trade can hold.
Wherever that limit may be, once it is reached, the longs may simply overrun the trade's resistance and take the market higher, which is exactly what has happened in so many other commodities.
There are countless examples of assets that shouldn't have risen based on fundamentals, such as internet stocks in the late 90's or real estate in recent years, but history has shown repeatedly that a mob with plenty of cash and a gold rush mentality can temporarily overwhelm any market.
marketing@alchempro.com
