Traders will likely remember Dec. 27 as a pivotal day in the marketing year. Two weeks ago in this space, I opined that anything could happen in December because of thin trading over the holidays.
I recounted some of my personal experiences in the grain markets and in visiting the Chicago Board of trade with farmer customers. Last week, I mentioned that that column was picked up by Google and sent out on their newsfeed on Android phones.
Market on the move
Some of that theory was experienced by those at their desks in Chicago on Dec. 27. After months of the same price cycles and little apparent hope for higher prices, March corn futures closed up 8 1/4 cents, setting a six-month high.
Chicago March wheat futures — what I call “cookie” wheat since that is what it’s best used for — finished the day up 12 1/2 cents after starting out lower. The close just missed a tick of being an “outside day up,” which is a huge bullish market signal to the technicians. An outside up day is a day when the price starts out below the previous close and then closes above the previous day’s high.
March soybean futures, on the other hand, were erratic. They were up 16 cents Dec. 27, but on the next overnight, they were down 7 1/2 cents.
Market comments were all over the map. Most observers saw the corn gain as a bullish signal, but cautioned that for five years, we have had higher prices just after Christmas, and have had no follow-up, but rather lower prices in January. So, we hope that trend is only half true this year!
Analysts also suggested that the wheat was just a technical rally (you generally read this when there is no good reason for the move.) They said that the corn was influenced by thin trading in December. This is cover for the writers if the corn prices go back down. (That sounded cynical, but I have been at this for a long time, and I have had to write columns when I had no answers myself from time to time — maybe even this one.)
The cash traders were enthusiastic about the bounce, calling it “encouraging” and saying “there is renewed optimism” in the markets. I should embrace the idea of optimism, because Scripture says that “the farmer should plant in hope.” Corn for $4 and below does not inspire a lot of hope.
The traders noted that there was robust demand for corn and slow farmer selling. Duh! No farmer wants to sell at these prices, and they will hold as long as they reasonably can, whether that be the traditional “wait until after the New Year” or in March before the time demands of spring planting and the money demands of buying inventory of seed, fertilizer and herbicides. There is a strong trend of early commitments for planting inputs and the intrinsic price savings, but the depressed prices this year probably limited the early sales.
Fundamentals
There was some fundamental news for some of this. The wheat prices are being helped by continued downgrading of the Russian wheat crop. Russia is the number one world exporter of wheat, and their crop is significantly smaller because of weather problems. It is a long way to the harvest of a winter crop, and there will be a lot a talk until the wheat is in the tank, but so far there is agreement among observers that the crop will be small.
We should not be smug, since we could still have a January or February with 10 days of below-zero temperatures on bare ground in the Plains. We normally have at least one scare about the wheat crop every year, whether it turns out to be true or not.
My enthusiasm for the markets Dec. 27 indicating higher prices is tempered by the fact that, as a producer, I almost always sold too soon, and as an opinion writer, I tend to be pessimistic. My pessimism comes from decades of frequent disappointments, some of which I may not remember well.
Mark Twain said that, “The older I get, the better I remember things — whether they happened that way or not!”
Prices
Looking at the prices is interesting. It is painful to look back to May, when we had good prices and see how far we have fallen. March corn futures were most recently trading (midnight going into Dec. 30) at $4.54 3/4. For a long time, we talked about corn getting back above $4, so this should be encouraging.
The high Dec. 27 was $4.55, and we touched that again Dec. 29. Last week I pointed out that the March had gone through several cycles but kept having highs around $4.52 and a little. So, it is important that we are about that, having “broken resistance.” It is now critical that we stay above that, so that the line of resistance now becomes our support line on the chart.
March soybean futures, which have been tossed and turned by every nuance of South American weather, are now trading at $9.91. We were up to $9.98 Dec. 27, teasing that psychological number of $10. Traders are suggesting that they think the worst of the weather talk from the South American soybean production areas is already “in” the market. There are forecasts for drier weather, but the price impact of those forecasts is thought to now be limited.
Soybean futures have been in a general downtrend since the high May 23 at $12.33 3/4 March futures. Our low was Dec. 18 at $9.52. I like the $9.98 better. As a famous Hollywood artist once said, “I’ve been rich, and I’ve been poor, and rich is better!”
March wheat futures have turned around, but I am forced to look at the high May 28 of $7.72 3/4 and think, “we missed it!” I see nothing that gives us good prices for a while, but we have improved from a recent low Aug. 27 at $5.42 to our current $5.48 1/2. Sadly, we had a rally to $6.39 Oct. 3, and we missed that, too.
