Market Monitor

By Marlin Clark

 

Market rally breaks down

Trading continues to look for direction on the Chicago Board of Trade. A rebound rally has run out of steam and we continue to stir the tea leaves and chicken entrails looking for clues to the future.

Corn and beans had shown some progress the last ten days. Prices were inching higher, with corn especially looking towards the report gap that yawned between 4.03 and 3.95 n the March chart. In corn, the gaps are almost always filled, and that gap made a nice target.

It is still a nice target, be we are shooting at it from a lower level after Monday trading. Monday the March corn futures were higher overnight, but a loser from the beginning of day trade. Most of the day we were down eight cents, with a close down seven and a quarter.

During the overnight trading corn futures got within three and three quarters of a cent of the start of that gap, which came after USDA shocked the market with a record corn crop final estimate. The day trading considered the night traders improvident, it would seem. They chattered about the slow export pace and the stronger U.S. dollar. Those outside markets can be a reason or an excuse for the trading.

The fear in corn is that the exports could be as low as 1.6 billion bushels, if you extrapolate the current sales, instead of the USDA estimate for the year of 2.0 billion. This would be like adding 400 million bushels to the crop. We did that in the January Inventory Report and that is how this mess started.

Remember, May futures were at 4.36 on January 4^th. They lost over 70 cents to the early February low, and had rebounded 27-1/2 to 3.92. We are now at 3.82. Corn is being supported by the thought that we are headed for a wet spring and delayed planting. I cannot figure how we are thinking that this far ahead, but as long as it supports the market I am for it.

The corn may also be supported by the idea that we will plant fewer acres because beans are worth relatively more, especially given input costs. Farmers who prepaid fertilizer and seed tell me that the fertilizer took another break, but shocking seed prices made up for the lower fertilizer prices. So, we aer still ripe to reduce acres, and the market is defensive.

While the corn was breaking Monday, soybean prices held their own. Beans have retraced 44 percent of their $1.67drop, then lost nearly 30 cents again. Recently they are steady on big swings during the day.

The wheat has been discouraging, both on the Board and because the millers are not hungry for what is left around. We lost over a dollar off the price in a month, then gained half of that back by Monday. Monday was what we call an "outside day" in May wheat futures. That is, the high of the day was higher than the day before and the low of the day was lower than the day before. This is an indicator of a change in direction, but it hasn't indicted much yet. The swing was from 4.986 to 5.26 during the day, with a current trade ofr 5.04-1/2. This bears watching, but looks a little negative to start.

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