Market Monitor

By Marlin Clark

Yo-Yo market comes back

Somewhere is the dresser drawer is still the Duncan yo-yo I used to play with. Not when I was a kid, mind you. That disappeared somewhere in one of my mother's housekeeping. This one was given to me one Christmas a few years ago by my kids. I immediately showed them how to go "over the falls" and around the world.

The joy of making a yo-yo do what you want is that you decide what you want. The last few weeks we have had a yo-yo market and we have had no control over it. Market analysts sit and ponder reasons for the recent moves after the fact. After the fact we can always make sense. Predicting the future is a different story. We don't want readers and customers to see the ugly side of the business—the tea leaves and the chicken entrails.

Stirring through the entrails this morning we see the excitement of new highs in corn, or highs confirming the May high, depending upon how you look at it. And, we see two days of easier markets as we decide if this is a bullish market or just a correction to an untimely downturn caused by actual fundamental information instead of tea leaves.

The fundamental information came in the form of the USDA Planted Acreage Report and the Grain Stocks Report. We also had world-wide stocks and other things going on, like the export inspections reports.

Aligning the reports with the results in the markets is harder than just reading them. Looking at the prices is the beginning point.

September corn futures made a high back in the middle of May at 3.91. Since then prices have been consistently lower, hitting a low of 3.32-3/4 on June 29^th and confirming that low on the open of June 30^th, at a half-penny higher. Then, prices got interesting as corn reacted to USDA reports by finishing nearly 30 cents higher, at 3.63-1/4. Follow-through the next few days led to a triple top. We hit 3.86-1/2 both on July 8^th and July 9^th, with a 3.86 even on July 12^th, Monday after the weekend. That high broke down Monday, with a 3.79-3/4 close, and we are more than a nickel lower at one point overnight. Currently, before the open Tuesday we have 3.77-1/4.

USDA now tells us that corn acres are up two percent over last year, to 87.9 million acres. 250,000 of those increased acres are in Ohio. They also say corn stocks are up 1 percent. So, where in the tea leaves can we see a reason for a return to the highs in corn?

The reason has to lie in fear that the crop size is overestimated. We started the year locked into the idea that our record fast corn pace, which slowed in Ohio in the middle of May, would guarantee a record crop. Right now the traders seem to be letting corn follow soybean gains, and to be worrying about the current condition of corn and coming weather.

Depending where you look, the corn looks rough. Holes, yellow spots, up and down fields are prominent. Then again, you can talk to farmers in NW Pa who say a little rain now would give them record crops. It is hard to get a consensus. What we do have is a ten-day period forecast to be hot and dry, and that may define things for awhile.

USDA says the bean plantings were also up two percent. If you are wondering how this is possible, the wheat acres are down eight percent, to 78.9 million acres. That is the lowest since 1971, while the soybean acres is a record. USDA also had the bean stocks down four percent.

The beans have been in tight supply to the processors, and the drop in perceived supply contributed to a big price move, regardless of acres. November futures gained almost 67 cents, to a Monday high of 9.60-3/4. We were 14 cents off that last night.

The big mover has been wheat, where reduced acres and poor quality pushed prices up most of a buck. The June 30^th low of 4.56-1/2 became the July 8^th high of 5.49-1/2. We are now 18 cents below 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.