Market Monitor

By Marlin Clark

Looking for Mr. Goodbar Chart

The confusion that is price movement on the Chicago Board of Trade these days is only heightened by study of our modern brand of tea leaves or chicken entrails—the bar chart.

Yesterday I was looking at the September and December corn charts and thinking they looked like a head-and-shoulders top had formed. This is a very strong pattern that has a right and left "shoulder" and a head. It signals a very strong topping sign, and portends a strong move back down.

That was yesterday. Today, Turnaround Tuesday, I am looking at strong overnight markets that have prices up a nickel on corn and beans, a dime on wheat. So, what goes? Is this just a blip on the chart, or is the trend not established? Let's look back.

Wheat has been the strongest chart, and does not show a strong topping action. September Chicago wheat futures had a low clear back in early June at 4.42-1/2, then rose steadily to the July 22^nd high last week at 6.10. Quite a move! We are still trading 5.98 this Tuesday morning after a break Monday to 5.84-1/2.

September and December corn charts are very similar, so let's look at the December. There we put the low in on June 29^th at 3.43-1/4. Early the next day we were a quarter of a cent higher, then started a big rally. The high was actually two weeks ago, posting a 4.10 on July 15^th. Since then we broke to 3.76 on Monday, but have bounced seven cents off that overnight.

November soybeans are in a similar move, but with bigger swings. On July 1^st we had the low at 8.94, then rallied nearly a dollar to 9.92-3/4 by the 16^th. In the next ten days we lost a third of the gain, making a low Monday at 9.61. We bounced 11 cents off that this morning late in the overnight session.

The corn especially shows a head-and-top formation, but the overnight violates that. This makes the day trade Tuesday very important. Chatter off the Board this morning before the open is that the market is trading the expectation of a big crop against the strong demand for the old crop. The current demand is known, the big crop is not. That makes it easy for strong demand to drive the market in spurts for awhile.

The USDA Crop Condition Report has the maturity as measured by silking ahead of normal by 14 percent. This seems to continue to confirm the trend toward a big crop. The market continues to believe that an early crop is a record large crop.

The conditions around my world are improving, with some timely rains of more than two inches total in the last week after a week of hot weather and curled leaves. Current forecast expect rain over the Midwest this week, but hot and dry weather ten days ahead.

So, all that to say there is uncertainty in the markets, and that results in volatility. I have listened over the hot line this morning to one man looking for a corn rally back to 3.95 to 4.05 December futures. We are now 3.82-3/4, up almost five overnight and 15 minutes to the morning open. At the same time, another analyst from his same company just said he did not look for the rally to be strong or to hold. You pays your money and you takes your chance.

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

Obstinate and opposite market

I am thinking this morning that the grain market is like a sixth grade boy this morning—obstinate and opposite. Whatever you suggest, he wants to do the other thing. The more you push, the more he pushes back. Too old to spank.

Think about it—we came out of reports that said we planted four percent more corn acres and four percent more bean acres and we made new highs. We started to dwell on tough growing conditions and locally poor stands, and we started back down.

Last Thursday we made a new high on December Chicago corn futures at 4.10. That was nearly 77 cents above the June 29^th low. The move was exciting, and short. It was also short-lived. Three ugly days have us back down to 3.88 on the Monday/Tuesday overnight. That is 22 cents off the high, and counting.

Similar action is seen on the November soybean chart. The low there was on July 1^st, at 8.94. We gained most of a buck, to 9.92-3/4 on Friday the 16^th. This Tuesday morning we traded as low as 9.66-3/4 again, 26 cents off the low in a day session and a night session.

Haven't had enough to make your Wheaties taste dry? Look at September wheat futures on the Chicago Board of Trade. The low was made clear back on June 9^th at 4.42-1/2. We rallied an incredible $1.56 to the Friday high at 5.98-1/2. Monday and Monday night we lost 24 cents off that.

At the same time the markets are going down, the chatter coming out of Chicago is that the crops are at risk to high temperatures and lack of rain. Also, the stands are not that great to start with.

So, it seems prices are not following what we are observing, but are going the other way. Trying to rationalize that is difficult, but I will take a shot.

Timing is everything. What we conclude may be already in the market, or the market may be late reacting. As producers were looking at the increased acres in the USDA reports, traders were looking at surprisingly reduced grain stocks in the same reports. While producers were worrying about corn curled up in the fields, traders were saying it was too late to worry about a big drought.

At the same time, the outside markets were turning against grains. After a long period of the dollar gaining on the Euro, the Euro fought back this week. It is gaining again, either as a rebound, or as a change in mood. This hurts exports.

So, decisions are hard to make. I think the market returns to worrying that the record yields predicated on record early planting are suspect. Here in Wayne TWP we have had rain forecast nearly every day, and continue to have it forecast for five more days. So far that has resulted in the tease of three ten-minute gentle showers in two days. The only thing growing in my lawn is the plantain.

No farmer is going to sell corn until it actually rains a lot.

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

Yo-Yo market comes back

Somewhere is the dresser drawer is still the Duncan yo-yo I used to play with. Not when I was a kid, mind you. That disappeared somewhere in one of my mother's housekeeping. This one was given to me one Christmas a few years ago by my kids. I immediately showed them how to go "over the falls" and around the world.

The joy of making a yo-yo do what you want is that you decide what you want. The last few weeks we have had a yo-yo market and we have had no control over it. Market analysts sit and ponder reasons for the recent moves after the fact. After the fact we can always make sense. Predicting the future is a different story. We don't want readers and customers to see the ugly side of the business—the tea leaves and the chicken entrails.

Stirring through the entrails this morning we see the excitement of new highs in corn, or highs confirming the May high, depending upon how you look at it. And, we see two days of easier markets as we decide if this is a bullish market or just a correction to an untimely downturn caused by actual fundamental information instead of tea leaves.

The fundamental information came in the form of the USDA Planted Acreage Report and the Grain Stocks Report. We also had world-wide stocks and other things going on, like the export inspections reports.

Aligning the reports with the results in the markets is harder than just reading them. Looking at the prices is the beginning point.

September corn futures made a high back in the middle of May at 3.91. Since then prices have been consistently lower, hitting a low of 3.32-3/4 on June 29^th and confirming that low on the open of June 30^th, at a half-penny higher. Then, prices got interesting as corn reacted to USDA reports by finishing nearly 30 cents higher, at 3.63-1/4. Follow-through the next few days led to a triple top. We hit 3.86-1/2 both on July 8^th and July 9^th, with a 3.86 even on July 12^th, Monday after the weekend. That high broke down Monday, with a 3.79-3/4 close, and we are more than a nickel lower at one point overnight. Currently, before the open Tuesday we have 3.77-1/4.

USDA now tells us that corn acres are up two percent over last year, to 87.9 million acres. 250,000 of those increased acres are in Ohio. They also say corn stocks are up 1 percent. So, where in the tea leaves can we see a reason for a return to the highs in corn?

The reason has to lie in fear that the crop size is overestimated. We started the year locked into the idea that our record fast corn pace, which slowed in Ohio in the middle of May, would guarantee a record crop. Right now the traders seem to be letting corn follow soybean gains, and to be worrying about the current condition of corn and coming weather.

Depending where you look, the corn looks rough. Holes, yellow spots, up and down fields are prominent. Then again, you can talk to farmers in NW Pa who say a little rain now would give them record crops. It is hard to get a consensus. What we do have is a ten-day period forecast to be hot and dry, and that may define things for awhile.

USDA says the bean plantings were also up two percent. If you are wondering how this is possible, the wheat acres are down eight percent, to 78.9 million acres. That is the lowest since 1971, while the soybean acres is a record. USDA also had the bean stocks down four percent.

The beans have been in tight supply to the processors, and the drop in perceived supply contributed to a big price move, regardless of acres. November futures gained almost 67 cents, to a Monday high of 9.60-3/4. We were 14 cents off that last night.

The big mover has been wheat, where reduced acres and poor quality pushed prices up most of a buck. The June 30^th low of 4.56-1/2 became the July 8^th high of 5.49-1/2. We are now 18 cents below 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.