Market Monitor

By Marlin Clark

It's over when the fat farmer combines

Forget the fat lady singing. It's the fat farmer you have to be watching. They are not all as lean as Dean Miller and John Wallbrown.

This year all the yield guessing and market watching comes down to what happens when the fat farmer runs his combine. Either he is surprised for the good or surprised for the bad or he is satisfied he was right all along.

Well, "satisfied "might be an exaggeration. It kind of goes against type. Pappy always told me, nothing was ever any worse than a farmer said it was!

I say this as an observer who has been trying to pick the top of the corn market for a long time. Every time I look at the chart and tell you we just saw the top, we dip a little and come back. Monday we broke through the phony high made two weeks ago when the wheat futures were limit up overnight. At that time I said that the corn only made the December futures high at 4.38-3/4 because it was pulled up when the wheat was locked limit up. I said it was a spike that would show on the chart for a long time.

Well, Monday we broke to a new high, at least for more than a year, of 4.45-1/4. We traded above the spike on three different days. The overnight close going into Tuesday trading is at the last high. So, what is happening?

It has to be that the market is still uneasy about the crop size. The southern states are harvesting, and many places have record yields. Mixed in with them are scattered reports of results sharply lower than last year. No trend is in sight. Get the farmers moving in Iowa and Illinois and we will start to have some confidence in the outcome.

You have to love the mood changes in the markets. Early this season all the talk was that the record early planting would result in a record crop. Now, with harvest at hand, I read a report this morning that the early harvest was because of leached nitrogen in all the rains. My opinion is that the early harvest is because this year, when we planted early, we also got warm weather in May. The corn grew all month, and the early planting meant something. The growth in May was a result of heat units, and the total heat units determine harvest date.

So, it seems we are making highs just before harvest and positioning ourselves to have a bust in prices. Make that a Pamela Anderson bust in prices—phony and inflated with anticipation, smaller than expected when all the market news implants are taken back out.

Looking at prices, The December corn futures demonstrated pre-harvest volatility with a high of 4.37-1/2 on the 19^th, then a low of 4.15-1/4 on the 24, followed by a high Monday at 4.45-1/4. Down 22, up 30 in a short time.

While that was going on, the beans finally put in a dip after a long uptrend.The November futures high was at 10.49 on the 5^th of Aug. Since then we have seen a low of 10.11-1/2, a high of 10.48-1/2, a low of 9.93-3/4,a high of 10.34 on Monday, and are now trading at 10.13-1/4. A lot a volatility without a new high like we had in corn.

The wheat, after the big break, has been sideways, with significant range some days. We broke from 8.68 December futures the overnight of the 6^th, to 6.88-3/4 on the 18^th. Last night we finished at 7.02-1/2.

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 markets break from highs

Prices on the Chicago Board of Trade have broken sharply on the overnight trading going into Tuesday morning, as this is written. Corn, soybeans, and wheat have all traded dramatically lower, leaving the highs of the last few days behind.

I had to do some quick mental calculations when K-2 called from the Farm and Dairy for my prices this morning. We publish prices based on the close of trading at 2:15 EST Monday. Those have now gone away. On Thursday the readers look at those prices and have to be reminded of the disclaimer that the reader has to confirm them with the buyer.

K-2 is not to be confused with the second highest mountain in the world. That is the sobriquet I give Kristy Foster, the second reporter of that first name name at this paper. Thus, K-2, get it? Did the first one spell it Kristi, or is that my imagination?

So, this morning corn is down almost eight cents, the beans are down seven, and Chicago wheat is down more than 12 cents on the lead month. K-2 wonders if I know why. I wish I did.

The easy answer is that the USDA Crop Progress Report out Monday reinforced in traders' views the idea that the corn and bean crops will be records. The corn progress is still record early, and the bias is still that an early crop is a record crop.

USDA says that, as of Sunday night, 88 percent of the corn is in dough stage. Ohio is rated at 91 percent, up from 82 last week and way ahead of the 71 percent of last year. Crop reporters admit that there are a lot of holes in some fields, but they are confident the bushels are there. This week, it is hard to argue against that.

The thinking is then that we have good demand, but maybe not enough to support the current prices, so let's break them a little. Prices were supported by the stronger dollar, but that has gotten weaker.

December corn futures rallied to the spike that the wheat rally caused. That was 4.38-3/4 on August 5^th. We broke to 4.10 in six days, but rallied back to the high. Dec corn traded 4.37-1/2, 4.37-1/4, and 4.37-1/2 on Thursday, Friday, and Monday. Take a look at the chart—that makes a strong argument for a top after the break to 4.22 overnight.

Things are similar over in the bean pits, er, on the bean computers. This electronic trading has me wondering what the Board of Trade looks like these days. The beans had a 10.49 November futures high, then broke to 10.11-1/2. The bounce was right back to 10.48-1/2. Now we have traded lower three days to the overnight low of 9.96. Again, this looks like a top.

The December Chicago wheat futures came screaming off the 8.68 high of the 6^th to hit 6.77-1/2 on the 18th. We are now trading 7.14 again, with no idea of a return to the highs.

Make your arguments. What could happen this late in the season to give us new highs? Only a serious surprise in yields at harvest, which is just around the corner for some areas. What could give us sharply lower prices? Confirmation that the uneasy fears that have supported the market are unfounded.

That is the long version –my attempt to explain the break this morning. The short version is simpler.

When K-2 asked why we were lower, I said, "I don't know.

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

Volatile markets seeking direction

Volatility, by definition, is a measure of price movement versus time. The more price moves in a given time, the more volatile.

We are currently seeing increasing volatility in all three major grains as market uncertainty and topping action is defined. Fundamentals are somewhat uncertain, leading to divergent opinions. The excitement of a historic wheat rally has faded as traders are deciding if the rally is over or merely taking a breather.

"Breather" would be an understatement of the December wheat futures contract, where prices broke over $1.80 a bushel in ten days. After the high of 8.68 in the overnight hours going into Friday the 6^th of Aug, we traded 6.87-1/2 on the 16^th. The bounce to the overnight of 7.06-1/2 going into Tuesday as this is written does not amount to much. We have been up and down several days reaching this price, and we are up a dime Monday night as we wait for the market to open this morning.

It was exciting while it lasted. If it returns it will be exciting again. As usual, prices went down faster than they went up, and the downward moves are the gut-wrenching ones. December Chicago wheat gained nearly $4.00 in two months, but lost almost half of that in ten days.

The corn and soybeans have become more volatile as they also made highs. They are both still trading near the highs, however. Corn futures were trading in two-week cycles, but near the top got into cycles of a week or less. The soybeans had a long, one-month cycle, then had two very quick one-week reations.

December corn futures had a low the end of June at 3.43-1/4. The high was made a little more than two weeks later, at 4.10 on July 15^th. Two weeks time got us back to 3.76 on the 27^th, but by the 8^th of August we were back to the contract high of 4.38-3/4. By the 11^th that was 4.05-3/4, down 33 cents, but we bounced back to 4.33 by Monday the 16^th. Overnight Monday/Tuesday we are at 4.23-3/4. The pattern of quicker cycles is evident in the last few weeks.

November soybean futures are different in that the long cycle to the top was very steady, more like the wheat charts. July 1^st showed us a low of 8.94, and the high of 10.49 took more than a month, to August 5^th. We broke prices 20 cents in a week, but rallied back to within a half-ent of the high on the 16^th, Monday. Currently the November contract is at 10.35.

It should not surprise you that traders are looking at the charts and trying to decide how to trade. It is too late in the summer to do major damage to corn. It is late for beans, although some surprises are possible in both. I am wary of the beans, where farmers tell me of crops that look great but have two beans in every pod. It is hard to count bean yields by walking fields and it is impossible to judge them from the road.

The wheat was early, and there is a lot of early corn and beans. The bean crop was stretched out by May rains so that harvest will start early, but be stretched out.

This may help corn by supporting basis, or the market may decide the crop is so big the length of harvest does not matter. This may be the year that the early corn is left in the field to dry for free. It will be tempting to run the combines long enough to tune them up and open up fields, then to not get in a hurry.

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

 

Wild and wooly market hard to track

In the old cowboy song, "I'm wild and wooly and full of fleas, and hard to curry below the knees…" That pretty well describes the Chicago Board of Trade recently. The wheat rally which has driven this market stuttered overnight going into Friday, then staggered and collapsed Friday. The result was a $1.20 turnaround in a few hours, and less hair on the head of every trader following these markets.

September wheat futures were up as high as 60 cents in the overnight, the daily limit. When trading opened Friday morning they quickly went from up 30-something to down 35, then slid on down to minus 60 cents. Since then they have traded up and down a little, but as this is written before the morning open Tuesday we have September futures at 7.04-1/4, well off the 8.41 high of the Thursday-Friday night session.

So, the party appears to be over, or is it? Is this just the break to get new buyers in, or get the old to return? Was this just serious profit taking? All this remains to be seen, as the stomach turns.

The thinking on the way up was that the wheat was pulling along the corn and beans. Not so, if you watch what has happened since the wheat break. Corn and beans have held most of their gains, until a significant break overnight going into Tuesday. As this is written, the corn is off six cents, and November soybeans are down 12 cents.

Farmers who were smiling briefly over spotty rains ten days ago are back worrying about crops. There is still a long way to go to make the near-record crops traders have plugged into projections. Does that mean that this concern is already expressed in the supported prices that wheat dragged up? Do we stay near the top on weather concerns? Do we break as we trade the last production reports? Do we make new highs on hot and dry weather?

Some or all or none of these things will happen, and that is as definitive as I can get! It's like answering a question with, "yes, no, or maybe."

Looking at the prices, September corn futures had the big low of 3.33-1/4 the end of June. We had a July 15^th high of 3.97-3/4, then a July 26^th low of 3.61-3/4. Thursday the high was all the way up to 4.25, on a daily range that day of the 30-cent limit. We are now at 3.97.

November soybeans had the big low July 1^st, then climbed in steady increments to the Thursday high at 10.49, up 1.55. We have eased off 26 cents to 10.23.

September wheat had a June 10^th low of 4.43-1/2, and a high of 8.41 on Friday. Just that fast we are at 7.04-1/4.

The end of that cowboy song is, "I'm a she-wolf from Cripple Creek, and it's my night to howl!"

There will be a lot of howling before this summer's grain markets are done.

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

Turn around Tuesday may bite us today

Turn around Tuesday may bite us in the behind today. Here a few minutes before the open of trading Tuesday I am looking at the charts and thinking we will at least take a pause in the market action that has given us new highs in corn, beans, and wheat.

I cannot escape my notice that the big gains during the day Monday that capped off a few days of frantic trading did not hold. By the close the prices were actually lower, and posted technical warning signs.

A couple of definitions would help here. When we look at the charts, we are doing "technical" analysis as opposed the the "fundamental" analysis of studying supply and demand. One focuses on the appearance of the charts, one focuses on whether the supply of grain or the perceived and anticipated supply is properly reflected in current and deferred prices.

Next, we frequently look for indicators that trends are changing. One is the "key reversal." In this, the high is higher than the high of the day before, and the low is lower than the low of the day before. This is a very strong signal of a top. Not so strong, but significant is the "outside day." In this, the High is higher than the day before, but the low is lower than the close of the day before.

Monday showed us an outside day in the September and December corn contracts. The December corn closed at 4.06-3/4 on Friday. Monday it traded a range of 4.03-1/2 to 4.18, and closed at 4.18. The lower low, higher high, and close below the previous close makes it an "outside day."

The November beans had a remarkable range, but managed a close above the previous day's close. The close Friday was 10.05. It traded Monday between 10.01-1/4 and 10.29-1/2. It closed at 10.10, though, above the previous close. Still, the move felt negative, and there seems to be follow-through on the Tuesday overnight trading. All the grains are lower going into the day session Tuesday.

As this is being written, the market has opened, and prices are not as bad as the overnight closes. However, December corn is down two cents at 4.02, November beans are down 3 at 10.07, and the September wheat is off 4 at 6.89.

This market has been following a weird combination of weather, supply of wheat, and outside markets. The combination has made it hard to make sense of any daily move. Wheat has dominated, with a move of $2.69 up since the end of June. That move has been steady and dramatic. This is the first break, and we are watching it closely.

There is an ebb and flow to the markets that seems to result in changes of direction frequently on Tuesday. That pattern is holding today, but we don't really know if the trend is changing until it has for a few days. That can be frustrating, but the successful futures traders don't follow the same rules as cash grain people. Futures traders follow the markets. Producers and users are always trying to anticipate.

The weakness overnight is accelerating as this is written. Corn is now down a nickel, beans down 11, wheat down 16 cents. We will be able to explain all this in some reasonable manner that may or may not be true when the day or the week is over.

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