Market Monitor

By Marlin Clark

Market stagnant on lack of news

I can only talk about March 31^st USDA Planting Intentions Report so many times. It will soon be old news, but it is still the market mover right now, which is to say that the market is not moving. Corn futures are trading sideways in a lack of news, while soybeans show signs of life.

May Chicago corn futures bounced 15 cents off a low near the old contract low this month, but have trades sideways the last few days. The May contract hit a low of 3.61-1/2 on March 11^th, just missing the 3.59 contract low of early February. A quick bounce got us to three days at almost the same number fractionally above 3.76. We lost some of that Monday, and the overnight before the open Tuesday has us back to 3.70-3/4.

The twin issues of acres and spring weather will make the market for a month or two. As I said last week, we have to be afraid of more corn acres because of cheaper fertilizer (but higher seed) and because of extra acres available because all the wheat did not get planted.

Now, the market gurus still want to talk about wet weather delaying planting. This seems so wrong here where we have a month to go before we get serious about planting, but it may be a legitimate concern. The areas of the Corn Belt farther south are not that far from planting on their calendar, and it is wet. Heavy rains across the region added to the problem this weekend.

Still, at this point the rain is filling up the soil, not delaying things. This is a sign that the market is lacking in news.

To fill the gap, writers are ginning up more ethanol news. DTN had two interesting stories this morning. They ares legitimate, but a little ways off. We are seeing serious consideration by the government to allow E15 at the pumps. Hindering the move to gasoline with 15 percent ethanol is the labeling problem of distinguishing it from #10. Also, retailers are worried about liability if some cars will not run on E15. The good news is, the big goal of the ethanol industry was to produce enough that all gas would be E10. Now we are looking beyond that goal.

Add to this the TN story about E85. GM has produced 4 million of the 7.5 million vehicles we have that will run on E85. So far the limited number of pumps keeps 90 percent of the vehicles running normal unleaded. GM is wondering if they should continue to produce them.

Moving to soybeans we see that they actually have an uptrend in place, both long-term and short. The May soybean chart shows us a low at 8.87-3/4 in early October, a low of 9.11 in early February, and an Ides of March low of 9.21-3/4. Connect the dots and you have a strong long-term uptrend line.

The trend recently is also up, with a bounce of over 53 cents after that March 15^th low, then a four-cent break. We are trding now at 9.71 March futures.

Meanwhile March Chicago wheat futures traded down very close to the contract low, then bounced over twenty cents, keeping half of the bounce so far. The contract low was 4.72 back in October. We got to 4.75-1/2 on the 11^th, bounced to 4.98-1/4 on St. Patrick's Day (when I got up late and forgot to put on my orange clothes), and is now trading 4.86.

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

Market Monitor

By Marlin Clark

Mixed USDA news brings lower market

Let's blame Uncle Sugar for lower corn prices the last few days. USDA released its revised Crop Production numbers on the tenth of March, and the news was mixed. The results were negative.

We have anticipated this revision with some hope that the corn crop size would be reduced. Thank God for small green apples! In this case, they were very small and very green. The revision came because at the time of the January Inventory Report, there were still a lot of acres of corn and soybeans uncut. The delayed harvest for corn wasmostly in Illinois, Michigan, Minnesota, and Wisconsin. The beans were still out in Georgia, North Carolina, South Carolina, and Virginia.

So, the good news, if you didn't live in those states, was that the crop was cut from 13.151 billion bushels to 13.131 billion as USDA included revisions in the Supply and Demand Report. The beans were cut from 3.361 billion bushels to 3.359 billion. Not much change, but in the right direction. Still record crops.

Now, the bad news. USDA is now saying that carryout at the end of the crop year will be just under 1.8 billion bushels, actually 1.799 billion. That is up from the 1.719 they estimated just last month, and up from 1.673 billion at the end of the '08-'09 crop year. It doesn't seem like much, but it is the worst category of number to be raised. This is a number that hangs over the market all year, with all the buyers knowing there is no reason to get hungry. To put it in perspective, it is the highest ending stocks of twelve years. That cannot be a good thing.

The carryout is being hurt by the slow export pace. USDA had been projecting two billion bushels leaving home, but they cut that 100 million bushels in this report. Exports have been running six percent behind projections, so they are preparing for the original guess to be wrong.

May corn futures have been volatile as lack of news, then mixed news hit the markets. The contract low was made on February 5^th at 3.59. By the first of March we had bounced 33 cents to 3.92, but it did not last long. We trailed lower for several days, then put in a low again the day after the new USDA report. That low was at 3.61-1/2, almost back to the contract low.

We have been looking forward to two things this month—the revision in crop size and the Planting Inventions Repot out March 31^st. The first did not work out, so cross your fingers for the second. Only smaller acres can help this crop right now. With big acres, only poor production can help prices later, unless there is unanticipated demand.

Hurting the chances for smaller corn acres are two unresolved factors. First, there is the matter of unplanted wheat. Acres that did not get planted can be presumed to go to another crop. In the Eastern Corn belt, that means corn or beans. Then, there is the matter of large acres coming out of expiring CRP contracts.

So, it is getting harder to imagine a scenario where we are surprised by smaller corn acres.

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

Market Monitor

By Marlin Clark

Bad timing for weak market    

Spring is coming to Southern Ashtabula County. I know because my stone walks are starting to burn through the snow cover we have had since before Thanksgiving. Temperatures are supposed to be in the fifties this week, so only the eight-foot loader piles will remain soon. A couple of weeks ago the section over the septic tank appeared, but now I can see stones most of the way around the house. I have a scrawny squirrel in the bird feeder, risking his life with the Lumbering Lab to try to get fattened back up. Last night we saw three different deer families out scratching in bean and corn fields where previously some scattered grain was buried too deeply to find. My 'possum got married just before winter, and has been gone for the duration. I saw one of his cousins a few days ago, so he will appear soon.

And, the phone is ringing with farmers that want to move corn for spring cash flow. Last week I expressed the hope that we could go back up and fill the report gap on the May corn chart. That has not happened. Now farmers are facing the need to sell corn for spring cash flow into a weak market that continues lower over the last few days.

May corn left a gap from 4.03 to 3.95-1/4 after the USDA January Inventory Report. Gaps on the corn charts, as I wrote last week, are usually filled. A few days have passed and we are going the wrong way. After rallying from the low in early February of 3.59 to the March 1^st 3.92 high, we have broken 21 cents instead of continuing into the gap.

The current break is not good for the timing of early spring sales. It does, however, prime the chart for another run to the gap if there is good news in the March 31^st USDA Planting Intentions Report. I know the reader is tired of hearing about that, but it is the only real, sizable fundamental news we have on the horizon. We need news for higher prices, and we are not getting it.

Soybeans, meanwhile, are arguably stronger in price, but not necessarily in direction. There we have seen a similar early February low, this time at 9.11 on the March chart, and a nearly 75-cent bounce to 9.85 on the 23^rd. From there we have seen a decline of almost 50 cents. Like the corn, we are seeing some consolidation the last few days. That is, we are seeing a narrowing of the trading range, with little change in the closing price. That is an indication of a change in direction coming, but it does not indicate which direction. It is a warning to pay attention.

Besides planting intentions, we have exports to worry about. The corn is too slow for the USDA projections, but the beans are doing okay. The lower corn prices might help move corn and catch us up. As we always say, the cure for cheap corn is cheap corn. The reality is that the market continues to concentrate on the record crop.

When USDA gave us the record corn crop news in January, they promised a March revision. We will get that next week. Who knows what that means, except we can hope that they lower the crop a little based on the corn still in the field at January one not doing so well getting in the bin. The users have little incentive to push prices to get grain because they know, with the record crop, that the grain is out there. The market is in the hands of the users, and we can't change that this year.

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

Market Monitor

By Marlin Clark

 

Market rally breaks down

Trading continues to look for direction on the Chicago Board of Trade. A rebound rally has run out of steam and we continue to stir the tea leaves and chicken entrails looking for clues to the future.

Corn and beans had shown some progress the last ten days. Prices were inching higher, with corn especially looking towards the report gap that yawned between 4.03 and 3.95 n the March chart. In corn, the gaps are almost always filled, and that gap made a nice target.

It is still a nice target, be we are shooting at it from a lower level after Monday trading. Monday the March corn futures were higher overnight, but a loser from the beginning of day trade. Most of the day we were down eight cents, with a close down seven and a quarter.

During the overnight trading corn futures got within three and three quarters of a cent of the start of that gap, which came after USDA shocked the market with a record corn crop final estimate. The day trading considered the night traders improvident, it would seem. They chattered about the slow export pace and the stronger U.S. dollar. Those outside markets can be a reason or an excuse for the trading.

The fear in corn is that the exports could be as low as 1.6 billion bushels, if you extrapolate the current sales, instead of the USDA estimate for the year of 2.0 billion. This would be like adding 400 million bushels to the crop. We did that in the January Inventory Report and that is how this mess started.

Remember, May futures were at 4.36 on January 4^th. They lost over 70 cents to the early February low, and had rebounded 27-1/2 to 3.92. We are now at 3.82. Corn is being supported by the thought that we are headed for a wet spring and delayed planting. I cannot figure how we are thinking that this far ahead, but as long as it supports the market I am for it.

The corn may also be supported by the idea that we will plant fewer acres because beans are worth relatively more, especially given input costs. Farmers who prepaid fertilizer and seed tell me that the fertilizer took another break, but shocking seed prices made up for the lower fertilizer prices. So, we aer still ripe to reduce acres, and the market is defensive.

While the corn was breaking Monday, soybean prices held their own. Beans have retraced 44 percent of their $1.67drop, then lost nearly 30 cents again. Recently they are steady on big swings during the day.

The wheat has been discouraging, both on the Board and because the millers are not hungry for what is left around. We lost over a dollar off the price in a month, then gained half of that back by Monday. Monday was what we call an "outside day" in May wheat futures. That is, the high of the day was higher than the day before and the low of the day was lower than the day before. This is an indicator of a change in direction, but it hasn't indicted much yet. The swing was from 4.986 to 5.26 during the day, with a current trade ofr 5.04-1/2. This bears watching, but looks a little negative to start.

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