Market Monitor

By Marlin Clark

Volatile markets seeking direction

Volatility, by definition, is a measure of price movement versus time. The more price moves in a given time, the more volatile.

We are currently seeing increasing volatility in all three major grains as market uncertainty and topping action is defined. Fundamentals are somewhat uncertain, leading to divergent opinions. The excitement of a historic wheat rally has faded as traders are deciding if the rally is over or merely taking a breather.

"Breather" would be an understatement of the December wheat futures contract, where prices broke over $1.80 a bushel in ten days. After the high of 8.68 in the overnight hours going into Friday the 6^th of Aug, we traded 6.87-1/2 on the 16^th. The bounce to the overnight of 7.06-1/2 going into Tuesday as this is written does not amount to much. We have been up and down several days reaching this price, and we are up a dime Monday night as we wait for the market to open this morning.

It was exciting while it lasted. If it returns it will be exciting again. As usual, prices went down faster than they went up, and the downward moves are the gut-wrenching ones. December Chicago wheat gained nearly $4.00 in two months, but lost almost half of that in ten days.

The corn and soybeans have become more volatile as they also made highs. They are both still trading near the highs, however. Corn futures were trading in two-week cycles, but near the top got into cycles of a week or less. The soybeans had a long, one-month cycle, then had two very quick one-week reations.

December corn futures had a low the end of June at 3.43-1/4. The high was made a little more than two weeks later, at 4.10 on July 15^th. Two weeks time got us back to 3.76 on the 27^th, but by the 8^th of August we were back to the contract high of 4.38-3/4. By the 11^th that was 4.05-3/4, down 33 cents, but we bounced back to 4.33 by Monday the 16^th. Overnight Monday/Tuesday we are at 4.23-3/4. The pattern of quicker cycles is evident in the last few weeks.

November soybean futures are different in that the long cycle to the top was very steady, more like the wheat charts. July 1^st showed us a low of 8.94, and the high of 10.49 took more than a month, to August 5^th. We broke prices 20 cents in a week, but rallied back to within a half-ent of the high on the 16^th, Monday. Currently the November contract is at 10.35.

It should not surprise you that traders are looking at the charts and trying to decide how to trade. It is too late in the summer to do major damage to corn. It is late for beans, although some surprises are possible in both. I am wary of the beans, where farmers tell me of crops that look great but have two beans in every pod. It is hard to count bean yields by walking fields and it is impossible to judge them from the road.

The wheat was early, and there is a lot of early corn and beans. The bean crop was stretched out by May rains so that harvest will start early, but be stretched out.

This may help corn by supporting basis, or the market may decide the crop is so big the length of harvest does not matter. This may be the year that the early corn is left in the field to dry for free. It will be tempting to run the combines long enough to tune them up and open up fields, then to not get in a hurry.

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