Grain markets have been volatile, with little direction, as traders sort out multiple information sources to define hard supply and demand information. Several important U.S. Department of Agriculture reports fill up the March calendar, and traders are trying to decide what the facts that will influence the spring markets really are.
In March, we have seen the monthly USDA Crop Production Report, the World Agricultural Supply and Demand Report and the Planting Intentions Report (often referred to as the Prospective Plantings Report). In addition, we have information from the USDA Ag Forum, which this year had real news. It feels, just after the middle of the month, like each report has jerked the market around, even if there were no surprises and especially if there were.
Volatility is a measure of the amount of price change versus time. It plots on the graphs as sharp up and down movements of prices, often in a short time. All three major commodities have charted large changes in prices over the last few months.
Corn
Look at May corn futures. In the middle of February, we had a high one day of $5.18 3/4. Right now, it seems hard to believe that we will get back there. By March 5, we saw a low of $4.48 1/2, a drop of over 70 cents. In less than a week, we got back to a high of $4.77 1/2. We had large daily changes. For example, on March 6, we were up .08 1/2 cents. On March 12, we lost 9 1/2 cents. The market was hanging on the newest news and reacting.
In the most recent volatile day, wheat prices actually led the market, with 20-some-cent changes in the Kansas City futures markets March 17. It was not the marching of the Irish that influenced prices that day.
Chicago May wheat futures gained 11 1/2 cents as traders focused on weather in the Southern Plains and in the Black Sea region.
For those of us who kept the TV on and prepared to go to tornado shelters, the danger was flooding and strings of tornadoes. For those in the Plains, the emphasis is on warm and dry weather that threatens the dormant and emerging wheat, depending upon how far north the crop is.
The danger for the hard winter wheat crop is that weather gets warm enough to break wheat out of dormancy too early or that warm and dry soils blow away, exposing wheat to winter kill. The weakening value of the dollar also helped wheat prices.
Changes
Looking at other recent prices, May soybean futures were trading at $10.17 1/4, up 1 3/4 of a cent at 9:30 p.m. March 17. The recent low was $9.55 1/2 Dec. 19, and the recent high was $10.92 1/2 on Feb. 5.
We have had several swings in prices, with a low of $9.91 on March 4, which is slightly more than a dollar drop in a month. Within two days, we traded all the way back to $10.36 1/2 and then dropped to $9.94 March 12. That’s a lot of change in not much time!
May Chicago wheat futures were trading $5.72, up 3 1/2 cents for the overnight into March 18. The recent low was $5.39 3/4 Jan. 15. In the next month, we got to $6.21 3/4 by Feb. 18. By March 4, we were back to $5.30, and we actually made a high March 17 at $5.75 1/4.
If you have any wheat left, you will have struggled to commit to a sale in this period, as the prices bounced around so much. If you are trying to sell new crop, it is even harder to make a decision because you don’t have to do anything but are forced to agonize over prices day-to-day.
Corn exports have been supported some days by good exports. For the week ending March 13, our last report, we exported 65.3 million bushels. This is a little below the previous week but helps maintain a pace for the current marketing year that is well above the previous year. So far, we have exported 1.211 billion bushels.
Market movement
While these markets have been volatile, one indication of how some large managed funds are thinking comes from current positions. It was noted March 14 that the spec funds had added 100 contracts of soybeans to their long positions but shorted an additional 9,000 contracts of soybeans. They did not add to wheat positions.
The World Agricultural Supply and Demand Estimates and Crop Production reports held no surprises. We now show corn ending stocks for the year at 1.54 billion bushels. One billion is considered tight, 1.5 billion has the market comfortable, but wary.
The soybean ending stocks are estimated at 380 million bushels, where maybe a quarter of a billion is tight.
My feel for this market is that these ending stocks leave us susceptible to any weather problems in the spring and summer. It is not hard to imagine weather that would get both corn and soybeans back to tight supply.
Thus, we have the potential for bullish prices later, even though we have soft prices now. The problem with that is just that we should never bet against good crops.
So, markets are volatile, may remain that way and may tease us into selling nothing and betting on the come, which may never happen.
