According to the old axiom, recession is when your neighbor has lost his job. Depression is when you have lost your job.
Similarly, we talk about the market making a “correction” when we are just watching the prices and can be objective about prices “taking a breather” after a long bullish move. When we have money in the market, and it makes a big negative move, it is more of a “retracement.”
Historic loss
Since every farmer reading this has huge money in the market whether he trades futures or not, last week was definitely a “retracement.”
July futures lost $873⁄4 cents in one week — the second largest weekly loss in history. It should be noted that making history is only fun when prices are chugging higher.
The all-time weekly loss was only a penny and a quarter higher, so this is a very big deal. Except that, in a sense it is not. Observers note that we did not really do chart damage.
The price has moved so far so fast, that the retracement, depending upon which low you look at, is not anywhere near the 38% magic Fibonacci number that technicians look for. That is, we have not dropped 38% of the recent move, which could indicate further declines — thank God for small green apples.
Turnaround Tuesday
As an indicator of market enthusiasm, or just as a breather in the other direction, May 18 we were experiencing a “Turnaround Tuesday” of small proportions.
Corn and soybean futures were each up eight cents or better, and Chicago wheat futures were up over a nickel. All of those farmers who were tearing their hair out last week if they were paying attention while they were trying to get back to planting, are breathing a little better this morning and hoping for the best.
There is nothing like being stubborn as the prices go up, and then never getting grain sold and watching a huge break in prices. Good planting conditions over the weekend will help them ignore it a little longer, perhaps.
Let’s look at price action
July corn futures made a new contract high of $7.351⁄4 May 7. The low then came May 17, at $6.33. That is over a dollar lost in 10 days.
At the same time, the new crop December futures went from a high of $6.38 to a low of $5.27 May 17 — a $1.11 loss. We were trading the July at $6.64-1⁄4 May 18. That is up almost 12 cents for the day, and four cents higher than when I started writing this.
The soybeans are a slightly different story. While the corn started crashing, the soybeans continued higher. When they did drop, the drop was relatively small. July soybean futures made the new contract high at $16.671⁄2 May 12, a gain of 273⁄4 cents for the day.
Prices reversed the next day, with a 581⁄2 cent loss. Yes, that is an 861⁄4 cent reversal, but relative to the price, it is not as big a deal as the corn.
We were trading July futures at $15.981⁄2 May 18, up 11 for the day early on and three cents higher than it had been one hour prior. The November futures were at $14.10, up 13 cents for the day, and a nickel higher than they had been an hour prior.
Volatile
Wheat futures on all three exchanges are volatile right now. We have drought in much of the Plains, and reduced crops expected from Canada and Australia. Even though world supplies look to be secure, the U.S. problems are dominating the markets right now.
Chicago July wheat futures had a $7.691⁄2 high April 27, and then a low of $7.111⁄2 the next day. We got back close to the high, at $7.671⁄2 May 7, and then dropped to $6.90-3⁄4 May 13. We were at $7.111⁄4, up 111⁄2 for the day May 18 and 3 cents higher than we had been an hour prior.
Conclusions
The party is not over until the fat lady sings about a retracement over 38%. It is not unusual to see dollar moves in corn in a month, although moves close to that in a week are very rare.
Volatility is highest at the top. Try to resist picking the top. If we get back half of our losses, reward the market with a sale.
