Market Monitor

By Marlin Clark

Another leg up in the grains

Six weeks ago and a little more we finally made the big highs in corn and soybeans. I had been impatient, had predicted highs several times, and was finally right. As prices broke there were, as usual, technicians who said there was still room on the chart for one more leg up.

Then prices broke hard. One more leg up? Yeah, sure! Time to get grain sold before it got away from us. Well, as they say, that was then and this is now. Now we have new highs in corn and beans, and are back near the top in wheat. Now we are back to picking the top and wondering when we get there if analysts will pop up saying there is room for one more leg.

March corn futures have demonstrated a clear down-trend, then a clear up-trend. Almost every day we have seen a trade sometime that is higher than the high the day before, even if we don't close higher. On November 9^th we had a high of 6.17-1/4, then dropped nearly a buck to 5.20-1/4. On Monday and again on the Monday-Tuesday overnight we have seen a new high of 6.19, back up close to a dollar.

So far one can argue whether that is a new high or a confirmation of the old high. The numbers are close to the same. This means the next few days are significant. Do we actually make a leg higher in the charts, or are we just making a double top, which is a very negative sign. Either way, here is a selling opportunity. Cash farm prices for the summer are now close to $6, and the question is whether to be brave or foolish selling or waiting to see if we go higher.

The March soybeans are now well into new territory, knocking on the door of $14. Beans in the teens, well into the teens! This did not happen easily. The last high was 13.54-1/2 on November 12^th. Just five days later we were at 11.83. That is a drop that defines "ugly" and was depressing at the time. Here were are, though, just a month and a little later, and the overnight going into Tuesday has us at 13.96-3/4. So, here two we are looking at one more leg up, but in the beans we have actually made at least part of the leg instead of just confirming the high. We are more than 40 cents above the old high, and made another gain this morning before the daily open.

The March wheat futures have not shown a clear chart, having many erratic days. Nevertheless, a look here confirms a return near the high. On November 1th we had a low of 6.56-1/4, just after the corn made a high, and just when the beans crashed, also. By the 7^th of December, however, the March wheat futures had bounced to 8.11. What followed was ugly, though. We dropped to 7.58, but now have come back to 7.90. Maybe the high is in sight.

Some of the bounce came after USDA reports in December, but for the life of me, I could not have said that anything in them was a help. This seems to be a trading cycle that is determined to put in another leg, and may just be driven by outside computer trading of huge and fickle positions. The next real fundamental news is just ahead of us, with the January Inventory Reports. This will confirm the reason we are trading higher, or it will but the top in, or it will confirm the top that may be made before the reports are released.

In any case, these are touchy times, and judicious sales are required.

 

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 rebounds towards highs

 

I got a dose of reality in the Covered Bridge Pizza parlor in Andover Monday night. A reader asked me, when are you going to say that you know what the market is doing?

This is a dig at me for frequently admitting that I can follow the direction after the fact, but am struggling for finding a reason for what is going on. The trend in this analysis business is to always sound pedantic, like the writer is all-seeing, all-knowing. Trouble is, that just doesn't happen, and my friendly reader was jerking my chain about my honesty.

Here I am again this morning. I have to report that, after weeks of hunting for a market top and finally getting it, I have spent the last two weeks watching prices go back towards the highs made and wondering why. If we finally broke prices on November 12^th based on crop reports that maybe made sense, why are prices going back up?

Well, when prices broke, the government was reporting some reduction in the crops of soybeans and corn. The Crop Production Reports were released on Friday, the 9^th of November. The market went sharply higher that day, but that was the last up day. By the next day the mood was that the market was overdone, and we made huge corrections. March corn futures dropped 97 cents in two weeks from a high of 6.17-1/4 to a low of 5.20-1/4. March soybean futures dropped $1.73-1/4, going from 13.48-1/2 to 11.75-1/4! March wheat dropped $1.43-3/4 to 6.56-1/4.

These were huge corrections, and very discouraging. All the way done people like me were trying to rationalize why the break was so hard after a minor USDA correction that was actually bullish. We blamed it on politics, the dollar relationship to the Euro, to market emotions, to the stirring of chicken entrails. The chicken entrails probably made the most sense.

Now, the market has rallied for a month, and we are back in the range we expected a couple of days after the report. March corn futures are trading 6.00 this Tuesday morning before the open. We have been up 17 of the last 20 trading days. On almost all 20 days the high of the day was higher than the high the day before. That really defines an uptrend.

At the same time the soybeans have come back 1.44 of the 1.73 break. The chart shows a nearly unbroken line of advance. Wheat futures have actually rallied back to made a new high, at 8.11 on 12/17, 18 cents above the 11/9 high.

Now the market is looking for the high in corn and beans again. Traders are talking about world-wide wheat supplies not being enough. They are worried about running out of corn and beans, with carryout estimates cut by the government. Now we are all wondering what is driving things again.

So, now comes traders to the U.S. Senate, asking that they look into action of the Board, and asking the regulators of the futures markets, the CFTC Board of Supervisors, to limit the positions of traders. The belief among the actual cash traders is that in 2008 when the corn went over $7, it was an artificial high put in by large-position speculators artificially moving the market. The result was elevators broken by being blown out of hedge positions by limited funds for hedging. The other result was that farmers were not able to cash in on high prices because commercial buyers were forced to stop buying,

It remains to be seen if we make new corn and bean highs. Suffice it to say that I will not be doing any predictions just now.

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

Chicago Markets sneak higher

Maybe I have just been asleep at the switch. Maybe I am loafing through the day, not paying attention. Maybe there is something finally going on in the markets and I am slow to react. There must be some good excuse for what I told a farmer this morning.

"On, nothing much going on. We gained overnight what we lost yesterday."

Well, it seems like that, but it isn't true. It has felt like the markets were just see-sawing around for no real gains. It seemed like we were in a trading range with no real direction. Problem is, I looked at all the charts this morning and we are making real progress with real short-term uptrends in place and a fairly dynamic wheat chart in place.

What happened? If I look carefully, we have been up and down on opposing days, but we are gaining a little in each swing. In the case of wheat, the last few days we have gained a lot. While I have been trading corn and beans, the wheat is back to the highest price since just after harvest.

For wheat, it is that time of year. We stop pushing away cash bushels at elevators that want to use space for corn and soybeans. We start to look around at what is going on in the world. We start to think about all the things that can happen to the winter wheat crop before spring. We look at world-wide supply and demand and remind ourselves that there is no more wheat until the Australians hit the fields late in our winter.

Somewhere in the process we made a low at 6.56-1/4 March Chicago futures, rallied slowly over 8 trading days to 6.90-1/2, then screamed higher. Overnight going into Tuesday we hit 8.09-1/2, which makes the move over $1.50. Where have I been while this was happening? Was there money to be made? Someone is cashing in on this.

Meanwhile, we have seen gains in the corn and beans. They are not steady gains, but steady by jerks. March corn futures had a low just back on November 23^rd of 5.20-1/4. Overnight we have traded 5.75-3/4, 55 cents higher in a few days. We closed the overnight session on the high. We are still a long way from the recent high of 6.17-1/4 posted November 11^th, but we are starting to think about a two-thirds retracement of the move lower. If we get that, we will get ambitions of one last leg higher.

The soybeans are a similar matter. The low was November 17^th at 11.75-1/4. The high was Monday at 13.06-3/4. That is now just 36 cents below the recent high of 13.48-1/2 back on the 12^th of November.

So, now we look for perspective. Are there fundamental reasons why we are rallying? There is nothing large that I notice, but I already admitted I have been asleep for a week. Or, are we just reacting to a big break lower that had little fundamental news to support it?

There is talk that the corn and bean carryout is going to continue to tighten. That is the kind of talk that helps a market retrace, but does not blow it out the top. I continue to view this market at a selling opportunity. These are historically high prices, having been seen only once before. The last time the cash buyers had to stop buying because they ran out of margin money to risk.

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