Market Monitor

By Marlin Clark

Lack of insight, but not opinion

I was reminded this morning that when it comes to really knowing what is going on in the grain markets, I am as useless as certain vestigial mammary organs on a male swine. Maybe you have to think about that for a moment. I cleaned it up a little for the "General" audience. In fact, at various times in my life certain companions have suggested that I am a male swine, but that is another story.

Perhaps I thought this as I studied charts getting ready to write this, and noticed that I was long a little corn and short a little beans at just the time that corn was going down and beans were going up. Surely, if I knew what I were talking about, I would just sit here and play the market and get rich and work for myself.

In fact, I tend to be one of the most disciplined cash traders I know. I try to stay even the market, not betting on price movement but on my judgment of basis improvement. My judgment fails me now and then, but my price guessing is nearly flawlessly wrong. Put money on the table, and my nerves sue for peace. Peace to me is staying even.

My new quote system includes a voice service that has people in Chicago breaking in whenever they please to tell me what they know about what is going on in the markets. I am starting to think that they have to do this on some schedule whether they really know anything or not. I only have to do that once a week, and I don't interrupt Laura Ingraham and Bill Bennett to do it. That is what is playing on my computer until the experts break in.

It is a hard life being an expert. You have to have an opinion for why the market is doing what it is doing, a prediction for what it is going to do, and an explanation for why your previous opinion is not working out right now. Occasionally you get to brag about being right.

When reasoning about the grain markets is not working, you blame it on outside markets. This is what I have been doing for a month, while Greece, and then Spain, and then Portugal have been melting down their economic reputations. This has hurt the euro, helped the dollar, hurt exports, and given us all a reason for grain prices to go down when we thought they should not.

Now, just when I am tired of that argument, and tired that it is correct, things change. It is bad enough that our own economy is crummy. We get tired of having grain prices be at the mercy of every whim of every country. Why does this thing about being a world economy seem to impact on agriculture the most? Where is Earl Butts when you really need him? (He preached that we should plant fencerow to fencerow because we could not keep up with worldwide demand. Then we did, and found out that the world was hungry, but the hungry did not have money to buy our grain, which there was now too much of. Then came the 80's, when we traded in the Earl Butts farmers for younger, smarter ones who bought our equipment at penny auctions. Maybe that was just me…)

So , this week we traded grain on grain fundamentals for a change. At least that is what we said when the week was over. Soybeans were higher, and they should have been. There is some idea that all the acres are never going to be planted, and USDA tells us that the exports are for the year 21 percent ahead of last year and 7 percent ahead of projections for this year. The Delta beans are starting to burn up.

Corn gained over 30 cents before an eight-cent fall back Monday. Maybe this was a backlash to talking about Europe too long. Maybe it was just too much rain. You know there is too much rain when analysts keep saying, "It is not like 1993!" Well, I hope nothing is ever again like '93, when the Big Muddy got ten miles wide here and there. It is wet enough to hurt the crop, though, and severe storms are supposed to be widespread this week.

Wheat futures have perked up for ten days, which is by definition a contra-seasonal rally. It is harvest, and harvest is slowed by rain. Test weights are going down on the hard crop. The soft crop is getting ready for harvest, and we are starting to worry about that quality. Wheat was invented by God for dry regions, and Ohio is not one of them.

Maybe trading outside markets was more fun.

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

Dead cat shows signs of life

Last week I mentioned the old saw about the dead cat—that even a dead cat can bounce a little. That was in response to the idea that the market had gone so low, a little bounce did not mean anything.

The bounce has now lasted for a week, and I am forced to admit that there might be a little life in the old bag of fur. A look at the charts shows good gains in the spring grains, and the slowed wheat harvest is contributing to a bottom finally being found on the wheat charts.

Rain in the Plains has stopped the hard wheat harvest, and bought with it talk of declining test weight levels. This is particularly critical because elevators carried a lot of low TW wheat in from last year, looking to blend it out. The Chicago wheat has not been as volatile as the hard wheat markets, since harvest is still a couple of weeks away, even in this early year. Still, the July contract finally but in a bottom after a month of mostly lower prices. The low was on June 9^th, at 4.25-1/2. The bounce had us to 4.54-3/4 for a moment on Monday. (4.54—a nice point of reference for all you big-block Chevy fans, even if GM wants everyone to say "Chevrolet" now.)

The rains in the Midwest have stopped soybean planting, which is of some concern. The crop is at 91 percent planted, which is just above the normal 90. However, little progress is being made, and it is getting late.

The soybeans have worse problems than late planting. The outside markets we have been looking at are limiting exports. Again this week we failed to move offshore what we needed to meet the USDA calculations of demand. This time it was 7.4 million bushels instead of the 9.9 mb pace we need for the rest of the marketing year. The crush has also been disappointing.

Still, beans managed to jump 16 cents at one point Monday, and corn was up a nickel at one point. The what was up almost 11 cents. In this case the fundamentals did not overcome the easing of outside market issues. The dollar was down, crude was up, and the Dow traded both sides before going down 20 points.

For Monday, this overcame the fact that corn exports are also lagging. It also overcame the fact that the market anticipated improved crop conditions in the Monday afternoon report. The market was wrong, as USDA says the crop is not as good this week as last. That may come to play in the Tuesday market, although we were down fractionally in the overnight trading. The move up may have been a knee-jerk reaction to the official confirmation of the rumor of a sale to China last week. 120,000 metric tons is not a huge sale, but it is to China, where the rumor mill gets the most bang for its buck.

For the week, corn gained a 19-1/2-cent bounce off the low, July beans had a nearly 33-cent bounce to the Monday high, and wheat bounced nearly 30 cents to the Monday high. Let's see if we can keep the bounce going!

 

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

Leaden market shows no bounce

Every so often in a really sick grain market we get a small bounce, and try to explain it. The common attempt is that it was a "dead cat bounce." The joke is supposed to be, if there is any humor in a dead cat, that even a dead cat can bounce a little.

The joke this week seems to be that we can't even come up with a dead cat to bounce. This market seems to be more like a fishing line sinker. It acts like a hunk of lead that just keeps finding another crack to roll into to get just a little lower and lodge there. The market tries to pull up the sinker, but it is snagged on a sunken log.

Grains on the Chicago Board of Trade are barely showing signs of life, as they move in small ranges on small trading at the bottom of long-term charts. Take July corn, where we were now as low as 3.35 on Monday night trading. That is barely above the 3.33-3/4 contract low and harvest low made clear back on September 6^th. Some of the first trading of the year had us almost to 4.43, a dollar and ten cents higher. Now we are back there to the low again.

If you are looking for any good in this market, it is that we at least have not broken the contract low. If we slide a little more, we will be hunting for support in new territory. Be warned that explorers end up in the cooking pots of the locals they are exploring. In other words, the market could have us for lunch. Not a pleasant thought, especially after what we have been through. Reminds me of the best line from one Indiana Jones movie. Turning down a particularly revolting food, the heroine says, "it's just that I had monkey brains for lunch!"

July soybean futures are almost as bad. There, we have had bounces in the last two weeks, but no real gains. The market goes up one day, opens at the high the second, and crashes again. July Chicago futures for soybeans had a 30-cent range Friday and Monday, and finished at the bottom of the range. Briefly Friday we saw 9.58-1/4, but traded 9.28-1/4 once Monday. We are overnight going into Tuesday at 9.35-3/4.

Compare those prices to 10.20 on April 26^th and 10.92 the first of December. The harvest low was 8.91. The good news is that we are not at the bottom, like in corn, just headed that way. The bad news is, there is plenty of room on the charts to go lower.

That cannot be said for wheat, where we are charting new territory every day. We make a new contract low every day we trade recently, and there is no stopping this until one day we look around and see the slide has stopped. With harvest getting close in the soft wheat states, it is hard to believe the slide stops now. Maybe we get a surprise at harvest? The surprise for the hard wheat farmers has been basis of 1.50 under. As bad as the Board is, the basis makes it worse.

We made the low ofr 4.31-1/4 Monday, nearly 86 cents off the May high at 5.17. The November high of 6.23-1/4 represents more than two dollars.

For the past several weeks we have been saying that markets were being pushed lower by outside markets. The Euro has made a four-year low against the dollar. This makes exports more expensive, and smaller. The Euro is in trouble because of economic and debt problems by member countries of the European Economic Community.

Interestingly, the chatter off the Board of Trade this week varied. On some days the comments were that we were trading grain fundamentals. On others, that we were trading the outsides. The scare there is that, even when we ignored Europe, we struggled to make gains.

The market currently believes we are making huge crops, and with widespread rain soaking us down, it is hard to argue with that.

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

Rain starts to make grain

I lay awake in the middle of the night for a long time listening to the rain. I am not sure why I do that. It should be a soothing sound to put me to sleep. Maybe I am listening for wind, with a vestigial memory of the night the elevator blew off the corn crib. Maybe I am remembering the storm that gave us seven inches in half an hour and cut Knapp Road in eleven places in the three miles between home and the farm.

Perhaps I am the victim of life in Ashtabula County, where the blessing of rain has often been overdone. Rain brings life and rain brings mudholes. Only those of us who eventually gave up and finally planted buckwheat the first week of July will understand that.

Monday and Monday night we had two inches of rain in most parts of the North Coast. Five miles of I-80 in Trumbull County had three inches while I was driving on it Monday night. At 20 miles an hour. With my flashers on. With Squeeze begging me to pull over. The rain most places was just what the grain doctor ordered, although I suspect there is still an occasional bean field here and there that is unplanted. Those who started planting very early finished up this week after a two-week break of wet weather . Those who said it was too early to plant in the middle of April were struggling to finish the last week of May.

For those of us who have converted to suburbanite living in the country, the rain meant the worst thatch of the decade was finally pushed into my lawn. I mow six acres, partly because it makes the house look like a country estate, and partly because I gave up a thousand acres and I haven't quite adjusted. The only reason I have a five-foot mower is because I haven't scraped up the money for a six-footer, and if I had the money I would build a pond instead.

The rain soaked in with no puddles and only some damage to the peonies from five minutes of hail. A walk with Jack the Wonder Westie and the Lumbering Lab early this morning revealed a beautiful day and the realization that I have never mowed my 100-meter rifle range and it is now waist high.

And, I am reminded that "rain makes grain." It is one of the strongest axioms of the grain trade, and it will hurt the chance of price recovery from the bearish market we are experiencing. Grain prices continue to decline on the Chicago Board of Trade. The corn and soybeans are now near the February lows, while the July wheat futures made a new contract low of 4.48-3/4 this morning on the overnight electronic trading.

The wheat low continues the down trend line which has a low at 4.83-3/4 in October, a low of 4.60-1/2 in early April, and the low this morning. Major news is needed to stop this train wreck, and what we have instead is perfect weather for wheat.

All grains are continuing to be hurt primarily by European economic and political news. This is an old story, but continues as the dominant one. This week focus was on another country, Spain this time, with critical debt issues pushing toward insolvency. The result was more erosion of the value of the Euro versus the US dollar. This is a mixed blessing that gives us cheaper fuel, but also cheaper grain. Crude was down $20 in the last week, but corn was down 28 cents in the last month. I don't want to see corn be the same price as gasoline, no matter how cheap that makes it to get to the grandkids.

July corn futures had a low of 3.51-1/2 the end of April, bounced in two weeks to 3.85, but hit 3.53 early Monday morning. July soybeans spent three months, in three stages gaining a dollar from 9.20 on February 4^th to 10.20 on April 26^th. This Monday morning they were back to 9.30-1/2 and still skidding.

Good crops at cheap prices are better than poor crops at good prices, so enjoy the rain. I am ambivalent about the dollar value. As a good American, I want it strong. As a retired farmer, I care more about good prices and profitable farmers feeding the world.

Oh, and don't call me after 2:15 this afternoon for awhile. The market will close, and I will be replacing the sleep stolen by the rain last night with a power nap in my chair. When the phone rings I snap my neck, and that gives me something else to complain about.

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