Market Monitor

By Marlin Clark

Small gains stabilize grain markets

Grain markets have stabilized on the Chicago Board of Trade in recent days. That is a nice way of saying that we have seen small gains after large losses, without a real sense of direction being established.

December corn futures have retraced nearly a third of the large loss. We fell from the high of 6.05 on the 9^th of November to 5.06-1/4 on the 23^rd. That is nearly a dollar in a few days, and it filled the gap on the chart. In the week since we have gotten back over 30 cents to the current overnight trading at 5.36-3/4, touching 5.45 at one point Monday.

January soybeans paint a similar picture. The high was on November 12^th at 13.48-1/2, but the close that day was the low of the day, at 12.69. so, we had nearly an 80-cent range for the day. The drop continued until the 17^th when we posted 11.75-1/4. That is a drop of nearly $1.75. A rebound took us to 12.62-1/4 on Friday. We are now trading at 12.34, which is up nearly 60 cents. That is basically a third of the drop, similar in proportion to the corn chart.

December wheat, meanwhile, dropped $1.43, but has been up 33 cents in small increments the last eight days. We are currently trading 6.50-3/4.

So, what do these market moves mean? It is easier to talk about them from a technical aspect than from a viewpoint of any real insight. Technically, markets tend to retrace one third or two thirds of their major market moves. That has now happened in corn and beans. We crashed, then bounced back about a third of the crash. So, from a technical standpoint we are now clutching at straws, looking for more clues. Will we see this more bounce? Will we make one more leg up in the markets?

To move higher requires some strong fundamental trigger, I would think. The adjustments we have made the last two months have been based upon the fundamentals of change in the estimated crop size and some tinkering with demand ideas. The next market mover on the calendar does not come until the January USDA Inventory Report, which pegs the final crop size. There could be a surprise, but it is hard to believe.

That means, if there is a fundamental trigger on the horizon, the next one we can count on is way ahead at the end of March. That is the Prospective Plantings Report. After that comes early spring weather concerns leading into planting.

There are things that can happen in the meantime that effect supply and demand, but they are windfalls, not calendar-based expectations. We can have political upheavals, such as an escalation of the Korea mess. We can have hiccups in oil production. We can have dollar-to-euro changes. None of these are likely, just possible.

So, expect that the market will change for better or worse in the spring. In the meantime, I don't expect much excitement. If this break holds, we can expect a slow decline in prices as we look for fundamental reasons why we should be historically high after huge crops.

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

Getting thrown by the urban cowboy market

The iconic movie of 2002 was Urban Cowboy. This gave us John Travolta posturing in cowboy garb as he hit the night spots in Texas. Central to the movie was the mechanical rodeo bull. I always wondered just how drunk you had to be to get on that thing.

Well, we in the grain business are hanging on with both hands to the mechanical bull market. It goes up, it goes down, and it eventually throws you off on your face. I remember the disfiguring bump on the nose of my eighth-grade basketball coach. He said he worked his way through college riding rodeo bulls. One night a bull threw him up, then jerked back up to meet him as he came down. The nose was the result.

My nose is a little out of joint as I watch price action on the Chicago Board of Trade ht last few days. I have been playing the sucker by trying to pick the top. In the process I have been right, then wrong, then really right, then really discouraged. Prices recovered a little Friday, but the last few days have defined a break in values that has corn down most of a buck and beans down most of two bucks.

I can now stop talking about the report gap on the chart. That gap in trading formed on October 11^th, after a limit up day the Friday before. USDA had changed crop production numbers down a little, and the market really over-reacted. Well, it seemed like an over-reaction, but since the trading stayed up for a month, I have to remember that my prejudices are not valid. The market is always right.

The gap on December corn futures was form 5.28-1/4, the high that Friday after a 30-cent limit gain, to 5.55, the low on the Monday trade. We traded above the gap for more than a month, making a high at 6.05 on November 9^th. We broke prices that day, however, closing at 5.76-1/4. Five of the next six days were sharply lower until we finally closed the gap on 11/16 with a trade of 5.25-1/2. The next day we put in the recent low of 5.09, vey close to a dollar loss in all. We are currently trading at 5.21-3/4.

The soybeans gapped, but only slightly. The corn chart almost always closes the gap eventually. This is not true of soybeans, and, in fact, the gap is still there. On January beans the gap was from 11.45 after a limit 70-cent gain) to 11.61. On the break last week, January soybeans only got down to 11.75-1/4. They are now 12.11-1/2 after a dime bounce overnight going into Monday's day session. On November 12^th, meanwhile, we made a contract high at 13.48-1/2.

Trying to track this after the fact is fairly simple. Trying to make sense of this price movement is like trying to anticipate whether the bull turns to the left or right. How much of the volatility is a result of unusual, large spec trades? How much is about the fundamentals of crop size and demand? How much is just the dollar going up and down and effecting our prices when the buying is done in Euros?

I think the same thing about dollars when I pump the Ford full of gasoline. In the last ten days I have paid $2.959 and also 2.729. Does it have anything to do about gasoline supply and demand? Or, is it just the dollar?

If you are sitting on a pile of grain and have watched $6.00 corn futures and 13.50 bean futures come and go, you have a lot of company. I cannot sit here and tell you those prices are coming back. It is easy to say that the current prices are still historically high. That is small comfort, and emphasizes the difficulty of marketing farmer grain.

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

Don't ask—I don't have a clue

I feel like I should just put a recording on my phone. It would be like going through the McDonalds drive-thru, where the two-way now starts with a recording. "Would you like to try our blah, blah, blah…" My message would say, "If you are calling to ask what the market is doing or going to do, I don't have a clue!"

This would be because, after the last few days, I really don't. Oh, I have had some rationalizations and some impressions and some occasional opinions. But, after The market made new highs, crashed the limit on corn, came back the next session with a near-limit move, then crashed overnight again, I give up.

This is no longer about the weak dollar or the dollar rebounding. It is not about hunting for a market level based on revised crop sizes. It is not about rationing demand, producing gasoline with five percent more ethanol content, or about the election. I don't know or care if there are machinations from Washington contributing to the general increase in prices. I hear the talk of a move to $4 gas a way of putting cap and tax in effect in a practical way without law, and I am unmoved.

Just give me a break. Just let me watch the market float to some kind of equilibrium. Just let things go back to some kind of stability where I can kid myself that I can make sense of the price movement.

The most cogent thing I have heard recently is that market-moving trades are entering the pits these days of a size that we did not used to see. A large number of huge trades are becoming normal. Over time, they have no effect, because the market determines price, not the traders. As we look at the short-term, however, the effects of large trades can be disturbing and confusing.

Look at December corn futures. Friday October 7^th saw a high of 5.02-1/2. Before the open the next day USDA revised crop production numbers. We were quickly up the 30-cent limit. The next trading day, Monday, we gapped (left a hole on the chart) to 5.55, then made a 5.73-1/4 high. The next four weeks of trading got us higher most days, but not by much. We made a contract high last Tuesday the 9^th at 6.05. It lasted about two ticks, and I never saw it. The close was down nine cents for the day, after the explosive, blow-off high, at 5.76-1/4.

After the high we traded down three days to 5.34. As this was going on, the talk was of a rebounding dollar. Friday we put in a low of 5.34, and were down the 30-cent limit. Monday we were up 21-1/2 and had a higher high than the day before. Now, on Tuesday in the early, overnight session, we are down nine cents again.

Talk about volatility. This is the volatility of a yo-yo. At least with a yo-yo, you know what will happen when the string gets unwound at the bottom. At this point we could be destined to break the string and make a new low, or to raise the hand with the yo-yo to a new high.

In the process, we have come close enough to filling the report gap on the chart that the market will be satisfied. This is a formation that either gets filled or makes an island top. Now, it looks like it is filled. The chart is free to continue lower, or to consider the last month an interesting interlude on the way to another leg up.

In the meantime, producers have to make decisions. The easiest one is to talk yourself into believing that these prices are higher than you ever expected. Reward them with heavy sales.

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: written 11/8/10

By Marlin Clark

Grains hang onto highs

Grain markets continue to confound observers as new highs keep flowing as combines keep rolling.

Corn, soybeans and wheat have all made new highs or returned to the high in the case of wheat. This is happening even as we are finishing harvest, a time normally of declining prices.

Take your pick of the reason. Is it enthusiasm for the new e-15 ruling? Is it yields less than forecast? Is it just the result of the declining dollar?

Most people feel the E-15 ruling did not accomplish much. The government is now allowing all gasoline to have 15 percent ethanol instead of the current ten. The problem with this ruling is that it does not even meet the "kiss your sister" standard. Is there anyone who believes that the oil companies will retrofit all their stations to have an extra pump?

E-15 availability will now depend upon a decision by marketers to find reasons to replace their E-10 with E-15. Even this requires expense for labeling and changing over to a new product. It will involve lower fuel mileage and marketing issues. For example, do they switch, then lose business because the public wants the old gas.

Then there is the yield forecast. I am beyond knowing so far what the crop really is, but it appears the market is apprehensive that the supply gets tight. Hence, the price decisions going on at the Board of Trade.

The declining dollar is a totally different issue because it does not involve supply and demand. When the government announced that it is going to print a huge amount of money just to increase the supply and make money more available to loans, It is announcing to foreigners that our money is not worth as much. As the price in Euros remains the same for our product, the equivalent price in our dollars goes up. This may feel like a rally to the American farmer. In the short run it is. But, it should not be confused with the fundamentals that determine price over a longer time. That is, I should not be looked at as a reason for higher prices, just an excuse. If the dollar stays low, it does become a long-term price factor, but all the farmer inputs go up in a percentage similar to what out prices do because our fuel, fertilizer, and steel are foreign.

Looking at prices, December corn futures make a new high on Thursday the 4^th at 5.95-3/4. That means some months were over $6.00, another huge benchmark. We had old high at 5.88 on the 13^th. We are now trading just below the old high, at 5.86-1/2 before the day session has opened on Monday.

January soybeans are currently 12.80-1/4, down 3-3/4 overnight. The high was Friday, at 12.90. We have been up nearly every day since the report gap on October 11^th.

December wheat futures got back to the October 11^th gap high, or close. This morning early we touched 7.39, with the last high at 7.39-3/4 after the USDA Crop Report. In between we declined to 6.65, nearly off 75 cents.

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

Corn and beans hold highs through harvest

In a move that defies the normal timing of prices, grain markets continue to hold at their highs as we finish harvest in this country. Soybeans made a new high on Thursday and Monday, and corn furutes traded back to a new high on Monday.     

What is going on? The harvest is huge, but the market still looks at demand being strong enough to handle the crop that has been downsized a little in two government reports. Combines roll toward the conclusion of the crop, but the rally cannot be said to be over.

This is the week we switch current bean marketing to the January futures, so the numbers seem higher, with a dime spread. January beans made a new contract high Thursday at 12.48-3/4. That was followed up by a move to 12.46-1/4, near the high, Monday. Currently we are trading up almost a nickel on the overnight, at 12.39-3/4. That makes cash prices most of a buck lower, but at historically high prices, and at harvest.

The corn futures spent the last three weeks trading above the report gap in a 15-20 cent range, but last week corn actually posted a new high in this market that I felt was mostly a soybean rally. December futures touched 5.90-3/4 on Monday, then traded down to close for the day at 5.77-1/4, down almost a nickel. Still a lot of volatility in this market! I remember the excitement the end of July when we broke the barrier into $4.00 corn. Then, the middle of September we broke into the $5.00 range. Now we are on the verge of $6.00, and we are still wrapping up harvest! I have now used up my weekly quota of exclamation points!

I have spent the last two weeks talking about an island top. That supposed island is now almost a month old, and is looking less like an island and more like just a continuation of the bull move. This is a big move and I have been anxious that we not be caught unsold. The higher it goes, the more I feel that way. In the meantime, every time a farmer sells me corn he feels remorse a few days later. The day will come when that is relief, as the market falls. Now, if I just knew when that day was.

Chicago soft red wheat futures have put in an uptrend as the beans and corn boomed. December futures have moved from a high of 7.39-3/4 on the 11^th to a low of 6.65 on the 22^nd to a high of 7.28 on Monday the first of November. There was not a lot of conviction at that high, however. The Monday close was back at 7.02-1/2.

Harvest of soybeans is virtually done in most of the country. There are still some around here, but they are going fast. The nation is at 96 percent harvested, up from 91 last week. This time last year we were only at 50 percent, but the average is 79. In Ohio we are at 95 percent, with 89 last week. We were at 81 last year at this time and have an 85 percent average.

The corn harvest is at 91 percent in Ohio and 91 also for the nation. Quite a change from last year when we were at 50 percent in the country, but 81 in Ohio.

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