Market Monitor

By Marlin Clark

Leaden market shows no bounce

Every so often in a really sick grain market we get a small bounce, and try to explain it. The common attempt is that it was a "dead cat bounce." The joke is supposed to be, if there is any humor in a dead cat, that even a dead cat can bounce a little.

The joke this week seems to be that we can't even come up with a dead cat to bounce. This market seems to be more like a fishing line sinker. It acts like a hunk of lead that just keeps finding another crack to roll into to get just a little lower and lodge there. The market tries to pull up the sinker, but it is snagged on a sunken log.

Grains on the Chicago Board of Trade are barely showing signs of life, as they move in small ranges on small trading at the bottom of long-term charts. Take July corn, where we were now as low as 3.35 on Monday night trading. That is barely above the 3.33-3/4 contract low and harvest low made clear back on September 6^th. Some of the first trading of the year had us almost to 4.43, a dollar and ten cents higher. Now we are back there to the low again.

If you are looking for any good in this market, it is that we at least have not broken the contract low. If we slide a little more, we will be hunting for support in new territory. Be warned that explorers end up in the cooking pots of the locals they are exploring. In other words, the market could have us for lunch. Not a pleasant thought, especially after what we have been through. Reminds me of the best line from one Indiana Jones movie. Turning down a particularly revolting food, the heroine says, "it's just that I had monkey brains for lunch!"

July soybean futures are almost as bad. There, we have had bounces in the last two weeks, but no real gains. The market goes up one day, opens at the high the second, and crashes again. July Chicago futures for soybeans had a 30-cent range Friday and Monday, and finished at the bottom of the range. Briefly Friday we saw 9.58-1/4, but traded 9.28-1/4 once Monday. We are overnight going into Tuesday at 9.35-3/4.

Compare those prices to 10.20 on April 26^th and 10.92 the first of December. The harvest low was 8.91. The good news is that we are not at the bottom, like in corn, just headed that way. The bad news is, there is plenty of room on the charts to go lower.

That cannot be said for wheat, where we are charting new territory every day. We make a new contract low every day we trade recently, and there is no stopping this until one day we look around and see the slide has stopped. With harvest getting close in the soft wheat states, it is hard to believe the slide stops now. Maybe we get a surprise at harvest? The surprise for the hard wheat farmers has been basis of 1.50 under. As bad as the Board is, the basis makes it worse.

We made the low ofr 4.31-1/4 Monday, nearly 86 cents off the May high at 5.17. The November high of 6.23-1/4 represents more than two dollars.

For the past several weeks we have been saying that markets were being pushed lower by outside markets. The Euro has made a four-year low against the dollar. This makes exports more expensive, and smaller. The Euro is in trouble because of economic and debt problems by member countries of the European Economic Community.

Interestingly, the chatter off the Board of Trade this week varied. On some days the comments were that we were trading grain fundamentals. On others, that we were trading the outsides. The scare there is that, even when we ignored Europe, we struggled to make gains.

The market currently believes we are making huge crops, and with widespread rain soaking us down, it is hard to argue with that.

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