Cash grain traders have not enjoyed the early part of 2016, as prices for corn, especially, have been disappointing. New contract lows have taken out optimism that the new year could bring new price trends.
The long Martin Luther King weekend has reversed that feeling with positive trading on Friday, Jan. 15, and Tuesday, Jan. 19, that brings some support into trading on the Chicago Board of Trade.
On Friday, we read that the funds had increased their net short positions to the second largest since 2006. Nevertheless, corn was up a nickel.
Setting a trend
The gain Friday had some of us thinking that, well, it was just a long weekend. The shorts got a little even before the three-day break. Big deal!
Probably we would be lower Tuesday. However, we started out this Tuesday morning actually up four cents for corn and over six cents for the soybeans. That got us thinking that happy days might be ahead.
The gains did not hold through the 45-minute “biscuit break.” When trading resumed at 9:30 a.m., the day’s gains had been tempered to half of the overnight gains. However, we were still positive. An hour later corn is back to more than four cents on the positive side, and I am breathing a little easier. Maybe we are changing trends.
I have long said that there was no bullishness to be found, especially in corn, but seasonality would indicate some price recovery after the end of the year. That had not happened, but this morning there is hope for it to yet appear.
Price outlook
Looking at prices, March corn futures had a low of $3.48 1/2 on the seventh, then a high at $3.63 3/4 on the 12th. We made a new recent high this morning, at $3.68 1/2, but are now trading slightly below that, at $3.67 3/4. So, we bounced a nice 20 cents off the low, and are holding the gains for now.
The soybeans have been different, as we have been trading cycles, but cycles that have been going lower. The March soybean futures put in a high of $9.11 1/2 on Sept. 7, then dipped to 8.54-1/4 on the 17th. The next cycle high got us to just $8.92 3/4 on the 21st, then dipped to $8.52 on the 6th.
This Tuesday morning, we got up to 888, but are current slipped to $8.82 1/2, up three-and-a-half cents for the day.
Wheat futures are absorbing some world-wide concerns of killing cold in the Ukraine with little change. The last cycle had us making a low at $4.56 on Jan. 4, then a high of $4.84 1/4 on the 13th. Two days later we were back to a low of $4.65, but a rebound Friday got us back to a close of $4.73-3/4. We are just off that a half-cent this morning.
Outside factors
The biggest outside markets that continue to define our prices are the strong dollar and the weak oil prices. Cheap oil, now near $30 per barrel, after being as high as $145 per barrel less than two years ago, is good for farmers in the short run, but hard on an economy that was pumping its way to oil independence and now cannot afford to chase the shale play. The strong dollar hurts our grain exports.
Nevertheless, recent market action has me cautiously optimistic for the first time this year.
