Market Monitor

By Marlin Clark

Market rebounds towards highs

 

I got a dose of reality in the Covered Bridge Pizza parlor in Andover Monday night. A reader asked me, when are you going to say that you know what the market is doing?

This is a dig at me for frequently admitting that I can follow the direction after the fact, but am struggling for finding a reason for what is going on. The trend in this analysis business is to always sound pedantic, like the writer is all-seeing, all-knowing. Trouble is, that just doesn't happen, and my friendly reader was jerking my chain about my honesty.

Here I am again this morning. I have to report that, after weeks of hunting for a market top and finally getting it, I have spent the last two weeks watching prices go back towards the highs made and wondering why. If we finally broke prices on November 12^th based on crop reports that maybe made sense, why are prices going back up?

Well, when prices broke, the government was reporting some reduction in the crops of soybeans and corn. The Crop Production Reports were released on Friday, the 9^th of November. The market went sharply higher that day, but that was the last up day. By the next day the mood was that the market was overdone, and we made huge corrections. March corn futures dropped 97 cents in two weeks from a high of 6.17-1/4 to a low of 5.20-1/4. March soybean futures dropped $1.73-1/4, going from 13.48-1/2 to 11.75-1/4! March wheat dropped $1.43-3/4 to 6.56-1/4.

These were huge corrections, and very discouraging. All the way done people like me were trying to rationalize why the break was so hard after a minor USDA correction that was actually bullish. We blamed it on politics, the dollar relationship to the Euro, to market emotions, to the stirring of chicken entrails. The chicken entrails probably made the most sense.

Now, the market has rallied for a month, and we are back in the range we expected a couple of days after the report. March corn futures are trading 6.00 this Tuesday morning before the open. We have been up 17 of the last 20 trading days. On almost all 20 days the high of the day was higher than the high the day before. That really defines an uptrend.

At the same time the soybeans have come back 1.44 of the 1.73 break. The chart shows a nearly unbroken line of advance. Wheat futures have actually rallied back to made a new high, at 8.11 on 12/17, 18 cents above the 11/9 high.

Now the market is looking for the high in corn and beans again. Traders are talking about world-wide wheat supplies not being enough. They are worried about running out of corn and beans, with carryout estimates cut by the government. Now we are all wondering what is driving things again.

So, now comes traders to the U.S. Senate, asking that they look into action of the Board, and asking the regulators of the futures markets, the CFTC Board of Supervisors, to limit the positions of traders. The belief among the actual cash traders is that in 2008 when the corn went over $7, it was an artificial high put in by large-position speculators artificially moving the market. The result was elevators broken by being blown out of hedge positions by limited funds for hedging. The other result was that farmers were not able to cash in on high prices because commercial buyers were forced to stop buying,

It remains to be seen if we make new corn and bean highs. Suffice it to say that I will not be doing any predictions just now.

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