Market Monitor by Marlin Clark

Commodity Coaster still headed down

Maybe I should just go to bed on time, and bypass the office. There I was again at midnight last night, sitting in front of the computer, watching the overnight trading on the Chicago Board of Trade. Corn futures were up a fraction, and “Turnaround Tuesday” was ready to roar.
This morning reality has set in. Corn is down over four cents, soybeans are down nearly 12 cents, wheat is off four cents, and I really needed more sleep.
When the electronic trading started a few years ago, it was a competitive curiosity. Commodity exchanges in foreign countries with other time zones had decided to trade “our” commodities. The Chicago Board of Trade developed an experimental trading that was all electronic in an attempt to keep the business.
The thinking at the time was that speculators and hedgers needed to be able to lay off or take risk more than the three hours and 45 minutes that the Chicago pits were open. Apparently there was demand, not just for the trading times, but for the technology.
To make the overnight work, market orders were eliminated. All trading was at a price. The physical technology to take the orders and fill them went through some development. As a result, the electronic order taking was extended to daylight hours. Now, most of the volume of trading is done electronically, and the pit trading is the small market.
Also, as the trading has gone electronic, a greater percentage of the trading seems to happen at night. Time was that the trend never changed over night. There was never enough volume. Now there is serious trading at night, not just orders being filled that were a little late for the day session.
Last night I watched trading that was a little positive in price and thought that the last six days of trading might have finally resulted in a bottom. Corn was up until Monday morning a week ago, then has been down every day since. Ditto the soybeans, where we were down 30 cent for awhile Monday.
I am beginning to wonder what it takes to get back up to new highs. Those last six days have us Tuesday morning down 36 cents on March corn, to 3.66-1/4. Soybeans are down 62 cents, to 9.47 March futures. March wheat futures are off 22 cents, to 5.60.
At these prices, the producers seem frozen, unable to rationalize the prices with the expensive fertilizer and seed that went into the crop. The users, meanwhile, show little inclination to develop demand, as there is no reason to buy ahead. The market keeps getting cheaper.

Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.