Market Monitor: written 11/8/10

By Marlin Clark

Grains hang onto highs

Grain markets continue to confound observers as new highs keep flowing as combines keep rolling.

Corn, soybeans and wheat have all made new highs or returned to the high in the case of wheat. This is happening even as we are finishing harvest, a time normally of declining prices.

Take your pick of the reason. Is it enthusiasm for the new e-15 ruling? Is it yields less than forecast? Is it just the result of the declining dollar?

Most people feel the E-15 ruling did not accomplish much. The government is now allowing all gasoline to have 15 percent ethanol instead of the current ten. The problem with this ruling is that it does not even meet the "kiss your sister" standard. Is there anyone who believes that the oil companies will retrofit all their stations to have an extra pump?

E-15 availability will now depend upon a decision by marketers to find reasons to replace their E-10 with E-15. Even this requires expense for labeling and changing over to a new product. It will involve lower fuel mileage and marketing issues. For example, do they switch, then lose business because the public wants the old gas.

Then there is the yield forecast. I am beyond knowing so far what the crop really is, but it appears the market is apprehensive that the supply gets tight. Hence, the price decisions going on at the Board of Trade.

The declining dollar is a totally different issue because it does not involve supply and demand. When the government announced that it is going to print a huge amount of money just to increase the supply and make money more available to loans, It is announcing to foreigners that our money is not worth as much. As the price in Euros remains the same for our product, the equivalent price in our dollars goes up. This may feel like a rally to the American farmer. In the short run it is. But, it should not be confused with the fundamentals that determine price over a longer time. That is, I should not be looked at as a reason for higher prices, just an excuse. If the dollar stays low, it does become a long-term price factor, but all the farmer inputs go up in a percentage similar to what out prices do because our fuel, fertilizer, and steel are foreign.

Looking at prices, December corn futures make a new high on Thursday the 4^th at 5.95-3/4. That means some months were over $6.00, another huge benchmark. We had old high at 5.88 on the 13^th. We are now trading just below the old high, at 5.86-1/2 before the day session has opened on Monday.

January soybeans are currently 12.80-1/4, down 3-3/4 overnight. The high was Friday, at 12.90. We have been up nearly every day since the report gap on October 11^th.

December wheat futures got back to the October 11^th gap high, or close. This morning early we touched 7.39, with the last high at 7.39-3/4 after the USDA Crop Report. In between we declined to 6.65, nearly off 75 cents.

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