Market Monitor

By Marlin Clark

The silly season is upon us

In NASCAR the so-called "silly Season" is that period at the end of the year when teams are realigning. Drivers are going to other teams, teams are changing leadership or swapping drivers. People are hired, fired. Everyone knows this next year is the year. Just ask the Cubs or, for that matter, the Indians.

In the grain markets the silly season tends to come in last half of December. Traders take time off before or after Christmas and New Year's holidays. Commercial hedging can be heavy just before or just after the first of the year, depending upon the bent of the farmer who may need to sell or to hold grain for tax purposes. The heavy or light hedging may distort the market direction. Trading gets a little weird just because everybody may not be on the floor, and the market does not have the same liquidity.

Or, maybe I am just looking for a reason or a lack of reason for recent market activity. Prices were sharply higher Monday on the Chicago Board of Trade, after the Christmas break. March corn futures closed up seven and a half cents at 4.16. They actually hit this price and went through it right after the open, then traded lower than that most of the day before a strong close.

January soybeans on the Board finished up nearly 30 cents, but were just barely positive in the middle of the session. March Chicago wheat futures were up over 26 cents, but only up 6 cents for the middle of the day.

Most interesting is not the Monday trading, but the last few days. All three grains have made significant gains in the silly season, and we are now hoping that we don't give them back away when the boys all come back to town.

March corn futures had a December 18^th low of 3.91, then made the high Monday at 4.18-3/4. That is almost a 28-cent gain. January beans have gone from 9.84-1/2 on the 22^nd to 10.34 on Monday, up 50 cents. March wheat has gained 35 cents since the 17^th. That doesn't seem so silly, if we can hold on.

So, we ended Monday poised for a big Tuesday, right? Wrong, corn bread breath! Corn futures on the overnight going into the Tuesday session are unchanged, the beans are down six and a half cents, and the wheat is off a nickel. With Christmas on a Friday, we are trading more like a three- or four-day weekend.

Anything can happen today, and the rest of the week. Nothing means anything until after the first of the year. Well unless you are one of the farmers who sold me corn with the price up 8 cents yesterday. Then, it means something.

And, that is where we are—staking out lines in the sand, saying, maybe I can sell something here. Maybe I should worry that prices get cheaper. Maybe I should listen to the talk that South America is going to plant more beans than ever before. They should, based on the dollar price of soybeans, so where is the surprise? Maybe, heaven forbid, the dollar price of soybeans is not so important anymore, like the Arab countries that want to trade oil in Euros.

Our currency has gotten so cheap that we are starting to forget that the Euro started out as the European dollar. It was the new currency of the new EEC, formerly the Common Market. It started out at par with our dollar, but now it is worth so very much more.

Maybe we have forgotten when we could just trade grain and not worry about things like the value of the dollar.

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

Market Monitor

By Marlin Clark

Uncertain markets lead us out of harvest    

Sometimes I forget what business I am in. Yesterday a customer who buys corn in Central PA made a remark that is significant. He said that crude oil was going lower, so he supposed the grains would all be slipping off until that stabilized.

Time was when a grain commodities dealer did not have to be an expert, or at least conversant, with all other commodities, precious metals, and the value of the dollar. That time is gone. Now the markets are interconnected in odd ways and on a given day the price change in Chicago is not because of anything in the grains.

Historically wheat, then soybeans reacted strongly to some outside markets. Commodity traders who are dealing in gold and other metals may view soybeans as just another valuable commodity. If gold goes up, maybe soybeans are worth more. Or, in our current market, maybe gold is going up just because the value of the dollar against other currencies is going down. This makes the gold higher priced in dollars, but not necessarily more valuable. All those adds about buying gold because the price is going up are really about shorting the dollar.

On the other hand, corn prices now are strongly and directly related to crude prices. With a significant portion of the entire crop going to ethanol production, the price of crude oil, then its gasoline derivative, makes corn prices go up and down. If gasoline declines, it makes the ethanol portion of it worth less. That tends to lower the bid for corn at ethanol plants. If the ethanol plants, for competitive reasons, can't lower prices, they lose money and down the road may close. That lowers demand for corn and brings lower prices later.

All that to say this: prices are bouncing around, and it is hard, from purely a grain perspective, to say why. The only real fundamental news coming is the USDA January Inventory Report in early January. I have been talking about that, and it is finally not all that far away. After this delayed harvest, we will finally get to find out what the crop sizes really are, as measured in bin space. The hope would be that the crop is smaller, due to harvest losses. The reality is, that except for the heavy winds of last week, there has been little to hurt the standing corn. And, the last of the fields are often the best.

The trend of a big crop is to get bigger. Part of that is the USDA methodology, which seeks to make several small changes as they perceive a bigger crop, rather than to shock the market. Part of that is that we just are having trouble coming to grips with the idea that the sun hardly shone this summer, but we are close to an all-time record crop.

In December we have seen March Chicago corn futures at 4.21 on the 1^st and at 3.78 on the 9^th. We got back to 4.10 on Monday, but are closed the Tuesday early session at 4.05.

At the same time January soybeans were 10.78-1/2 on the first, 10.19 on the tenth, and back to 10.59 on the 14^th. The early Tuesday market closed at 10.52-1/4.
Without a surprise in the January reports, we have no reason to get back to the highs. Well, at least not from the grains themselves!

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

Market Monitor

By Marlin Clark

Market turns back south

Last week we looked at charts, trying to find signals of direction. Well, we know more about direction now.

Corn prices broke sharply on the Chicago Board of Trade this week for no particular reason I can think of. That should give you confidence that you are not wasting your time reading this!

Actually, the biggest reason I can think of is the one we looked at last week—technical analysis. Last week I said that sometimes the markets, in absence of fundamental supply and demand news, trades by looking at the charts. That seemed to be fulfilled this week.

Take a look at what I said: "Taking a look at March corn futures, we see that we are working on a triple top formation. This is a strong signal. It can mean that the overhead resistance, which is the line that connects the three tops, is getting stronger. It can mean that we need really big news to break through that line. On the other hand, it warns us that, if we do break through, we will make that the support line, and may trade strongly above it, with an opportunity to trade as high as the next high back on the chart.

"With March corn futures, that means that we have strong resistance to prices going higher at 4.25. We hit 4.24-1/2 on October 23^rd, then 4.25 on November 18^th. Monday we got to 4.20-1/4, but also had 4.07 the same day. The overnight electronic session closed just below 4.18. So, we are making a run at the highs, and we are currently failing."

Even a blind hog gets an acorn once in awhile. Corn and wheat markets are sharply lower this week, with corn breaking 37 cents off the 4.21-1/4 December 2^nd high, then recovering most of two cents overnight Monday night. If you think about it, that means that once again we experienced that dreaded "Turnaround Tuesday." We made the high Tuesday, and then went nine cents lower the same day. Also notice that we did not quite get back to the 4.25 double top area. We ended short, and that was a negative signal.

Now if we go back to the chicken entrails, err, March corn chart, we could see a support line that connects three lows before the recent break. Draw a line line connecting the last three lows and you learn something. The three successive lows were improving. That is, each low was higher than the one before it. We were 3.72-1/2 on November 11^th, 379 on November 9^th, and 390-1/4 on November 24^th. Extend that line and you find we broke through what we hoped would be support when we went to 3.84-1/4. Depending on your drawing, that is most of a dime below the line.

So, as we continue the technical analysis, we have to be discouraged about corn prices. Our best chance to sell corn just passed, and it was at an unusual time—while harvest was finishing. Our next chance for news does not really come around until the January USDA Inventory Report. If the yields in the country as a whole are like the ones around my home, the hope of the crop being smaller to help prices is gone.

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

Market Monitor

By Marlin Clark

The rearview mirror market

It is hard to get a handle on where markets are going these days. The easiest method, with the least recriminations when you are wrong, is to look in the rearview mirror. Volatility and outside markets are confusing things right now, but the charts give a fairly clear picture. Grain prices have been jerked around by weather –driven harvest delays and the mood changes in the markets because of them. The price of gold and the (related) value of the dollar against other currencies has meant more to the market some days than supply and demand.

Chart analysis, or technical analysis, is an attempt to predict where we are going by looking at where we have been. There have been clear signals on corn and bean charts lately, but that does not necessarily guarantee the future.

Taking a look at March corn futures, we see that we are working on a triple top formation. This is a strong signal. It can mean that the overhead resistance, which is the line that connects the three tops, is getting stronger. It can mean that we need really big news to break through that line. On the other hand, it warns us that, if we do break through, we will make that the support line, and may trade strongly above it, with an opportunity to trade as high as the next high back on the chart.

With March corn futures, that means that we have strong resistance to prices going higher at 4.25. WE hit 4.24-1/2 on October 23^rd, then 4.25 on November 18^th. Monday we got to 4.20-1/4, but also had 4.07 the same day. The overnight electronic session closed just below 4.18. So, we are making a run at the highs, and we are currently failing.

The March corn futures are way above the pre-harvest low of 3.15-1/2 on September 8^th. The slow harvest, and a reduction in the predicted crop size was part of that. Outside markets added the rest. If we could, in fact, break through the resistance, the sky is the limit. The last high before harvest was clear back in June. Then we traded daily highs of from 4.78 to 4.82 for eight days.

Now, the soybeans. January soybeans have shown steady gains since the low of 9.51 in early November. We traded an overnight high Monday/Tuesday of 10.74, a buck and a quarter higher in less than a month. In the process over the last two days we have broken through the old high of 10.58 made in the middle of August when we were worried the crop was in trouble. In between we had an August low of 8.85.

So, we have broken the old high. Now our objective is 11.05, made the 11^th and 12^th of June. Realistically, however, we can look at these three highs as forming a line of resistance. If we connect them, we can argue that we are already topped out.

So, what kind of news can make a breakout? The delayed harvest can help, but the market is not reacting too strongly so far. We will know more in a few minutes when we open. Yesterday we learned that the corn crop was still only 79 percent harvested in the country, although Ohio is ahead of that. We should be done. There may be harvest losses, but local talk of yields in some fields as high as 265 bpa is not encouraging that idea.

Meanwhile, basis nationally is at a five-year low, at minus 55 the March. Imagine the basis if we had got the crop off fast!

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