As we look back on the last few months of grain trading on the Chicago Board of Trade, we find little good news. Hanging on to any piece of good news has provided a little excitement this week, but the trends are still down.
Trading Aug. 19 on the Chicago Board of Trade provided that excitement, as December corn futures were up as much as 8 cents and November soybeans were up 19 cents. However, follow-through has been nonexistent.
December corn futures were down a penny Aug. 20 at $3.77. November soybeans were down 3 1/4 cents at $9.53, and December wheat futures were down 3/4 cents at $5.51 1/2. So, no big break, but the trend is still down.
Soybeans
November soybeans make the most interesting chart for those trading technical or those fundamental traders watching trends. Put me in the class of fundamental traders. I am watching real grain trading and production and trying to make comments that are more based on factors affecting production and sales than I am watching chart signals.
It may have been the chart signals, however, that bounced prices Aug. 19. A common remark among the commenting class was that we traded based on “oversold technicals.” That is a buzzword that means that the market traded up, and the only good reason for that was that chart watchers thought we had pushed prices low enough.
There was actually a good fundamental reason for a one-day bounce in prices. Weather reports have crop watchers, not chart watchers, worried a little about the next couple of weeks. We have light showers in the Plains forecast for this week, but little rain elsewhere. Then, forecasts are for drier-than-normal weather and hotter-than-normal temperatures. In other words, the fear of the crop moving into a hot, dry period spooked the market and/or provided a breather for a price history that has been down since May in all three major crops.
The November soybean chart is maybe the most interesting. The recent high was at $12.26 1/4 on May 8, and we will likely be looking fondly at that for the rest of the year. “Beans in the teens” were once a realistic dream, but they seem a long way back in the rearview mirror.
As this was being written Aug. 20, we were trading at $9.53, and that is down over 3 cents. So far, we have stopped the bleeding on four occasions, but each uptick has lasted only a few days. The chart appears to be in a steady downtrend if you don’t look closely for the upticks.
Corn
The December corn chart is similar. The high was at $4.96 3/4 on May 15. There are four discernible upticks on the chart after that, but never a trend change. June and July trading was mostly down. The 8-cent bounce yesterday felt good, but it now just feels like a blip on the page.
A day later, it seems that traders decided to take some profits out after another week down. The end result is a market most of a buck lower, trading at $3.77 this morning.
December wheat futures show us a $2 break since the high of $7.59 1/4 on May 28.That number has a lot of farmers wondering why they did not sell all the old crop and most of the new that day. The answer would probably be that they were waiting for $8, but we were trading at $5.51 1/2 Aug. 20, down just 3/4 of a cent.
Looking ahead
The plain fact that is clear for a fundamentalist like me looking at technicals is that we focused for a long time on all of the problems we seemed to be having with production, but traders believe that we are still having record crops. At this point on the calendar, we have to consider that they are right. A major principle of trading is that the market is always right.
A farmer’s viewpoint is that things are bad, and he hopes they get better. That puts him behind a futures market that is normally more optimistic than the farmers. They are very optimistic right now.
If you are in a dry spot, you tend to feel like the world is dry, and the market will soon realize that. You point to the fact that beans are “made” in August, and the crop can still be hurt. Well, August is getting over, and the odds of that dry weather forecast hurting the crop enough to matter are getting slim. Don’t bet the farm on it.
Sadly, I have to recognize that, if I had grain in the bin or the field, I would probably be undersold just like most of you are. It was hard to sell when the prices were not much above the cost of production, and the summer was still ahead. Now, it is really hard to sell with prices below the cost of production.
We are in the position of hoping for spring planting problems for everyone else to give us a chance at higher prices. If and when that spring bounce comes, it will still be hard to sell with the new reality of what level of prices we are seeing.
