AgDay Markets Now: Chip Nellinger Explains What Triggered Friday's Grain Rally and if it Can Continue?

Grains end sharply higher Friday; livestock, financial markets and many other commodities melt down.

Chip Nellinger, Blue Reef Agri-Marketing, says it was a true money flow or "Get Me Out" day.   "I think what's driving this is just some outside market volatility. 

The speculators had been buying commodities like gold, cocoa and coffee as a hedge against inflation but took profits in those markets as well.  He says, "We've seen big moves in softs like cocoa, the coffee market, the metals markets as we saw gold into new all-time highs this past week and big reversal Friday."  The stock market also saw a melt down with the dollar index sharply higher.    

He chalks it up to uncertainty with the Middle East or Iran Israel conflict flaring up, the continued escalation of the Black Sea war and fresh inflation fears.

Funds and speculative traders headed for the door and took profits or covered part of their massive, short positions in grains to produce a rally.  

Is this action a one day move or a trend that will continue?  Nellinger says it may be too soon to tell. 

He will be watching the outside markets to start next week to determine if there is a more serious problem in the financial and commodity sectors or the economy.  Initial inflation concerns had caused the initial correction in the stock market to start April, but he thinks there could be more serious issues.  

If the rally continues in the grain market and triggers more fund short covering Nellinger thinks it may only produce a 20 to 30-cent rally as it will be muted by farmer selling.