Market Monitor

By Marlin Clark

Rain markets break from highs

Prices on the Chicago Board of Trade have broken sharply on the overnight trading going into Tuesday morning, as this is written. Corn, soybeans, and wheat have all traded dramatically lower, leaving the highs of the last few days behind.

I had to do some quick mental calculations when K-2 called from the Farm and Dairy for my prices this morning. We publish prices based on the close of trading at 2:15 EST Monday. Those have now gone away. On Thursday the readers look at those prices and have to be reminded of the disclaimer that the reader has to confirm them with the buyer.

K-2 is not to be confused with the second highest mountain in the world. That is the sobriquet I give Kristy Foster, the second reporter of that first name name at this paper. Thus, K-2, get it? Did the first one spell it Kristi, or is that my imagination?

So, this morning corn is down almost eight cents, the beans are down seven, and Chicago wheat is down more than 12 cents on the lead month. K-2 wonders if I know why. I wish I did.

The easy answer is that the USDA Crop Progress Report out Monday reinforced in traders' views the idea that the corn and bean crops will be records. The corn progress is still record early, and the bias is still that an early crop is a record crop.

USDA says that, as of Sunday night, 88 percent of the corn is in dough stage. Ohio is rated at 91 percent, up from 82 last week and way ahead of the 71 percent of last year. Crop reporters admit that there are a lot of holes in some fields, but they are confident the bushels are there. This week, it is hard to argue against that.

The thinking is then that we have good demand, but maybe not enough to support the current prices, so let's break them a little. Prices were supported by the stronger dollar, but that has gotten weaker.

December corn futures rallied to the spike that the wheat rally caused. That was 4.38-3/4 on August 5^th. We broke to 4.10 in six days, but rallied back to the high. Dec corn traded 4.37-1/2, 4.37-1/4, and 4.37-1/2 on Thursday, Friday, and Monday. Take a look at the chart—that makes a strong argument for a top after the break to 4.22 overnight.

Things are similar over in the bean pits, er, on the bean computers. This electronic trading has me wondering what the Board of Trade looks like these days. The beans had a 10.49 November futures high, then broke to 10.11-1/2. The bounce was right back to 10.48-1/2. Now we have traded lower three days to the overnight low of 9.96. Again, this looks like a top.

The December Chicago wheat futures came screaming off the 8.68 high of the 6^th to hit 6.77-1/2 on the 18th. We are now trading 7.14 again, with no idea of a return to the highs.

Make your arguments. What could happen this late in the season to give us new highs? Only a serious surprise in yields at harvest, which is just around the corner for some areas. What could give us sharply lower prices? Confirmation that the uneasy fears that have supported the market are unfounded.

That is the long version –my attempt to explain the break this morning. The short version is simpler.

When K-2 asked why we were lower, I said, "I don't know.

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