Market Monitor

By Marlin Clark

New words for an old song

What's going on in the grain markets these days? Prices are mostly sideways in narrowing ranges as the markets seek direction. The most recent leg up may be the last leg. Instead of prices breaking sharply as we have seen in the past few months when we made new highs, prices are hanging on, but not going higher.

Rolling around in my head this morning was the old song, "What's Goin' On?" I had to look it up to see if it was Curtis Mayfield or Marvin Gaye. It was Gaye. And, except for the title, it had nothing to do with what's goin' on in the grain markets. Turns out it was a Vietnam era war protest song!

Corn producers are not protesting the grain prices right now, but feeders are. These are the best of times for producers, the worst of times for end users. Volatility in grain prices allows both sides an opportunity to price, but the bias for months has been high prices.

Now we are locked in a trading range looking for a reason to go higher or lower. From these heights, my bias is lower, but that has been true for the last buck. March Chicago corn futures showed a recent low on 1/20 of 6.27-1/2. By the next day we had posted the high at 6.67—nearly 40 cents higher. That is what you call a mood change. That is the kind of mood change that could have producers looking for $7.00 cash corn, but instead we have sideways trading. Although we got back near the high overnight going into Tuesday as this is written, at 6.61, we have in fact traded seven sessions between the high and the low. Most of the time we have seen prices between 6.40 and 6.62.

The soybeans show similar patterns, although they dipped toward the low at one point. The recent low was on January 11^th at 13.55-1/4 March futures. The next day we made a high of 1427, then a high the 13^th of 14.32-1/2. So, we had a nearly 80-cent range in three days. Currently we are back to 14.18.

Wheat is a different matter. There the world is still worrying about the supply and demand, and a sharply higher top was put in a few days ago. The old recent low was on January 11^th at 7.58-1/4 for the Chicago March contract. On the 27^th we made a new high at 8.63-1/2—more than a dollar gain in a few days. The current price is a break to 8.39-1/4. Even though wheat has shown the most bullishness, the current chart is not bullish depending upon how you read it. It looks to this semi-amateur technician that we now have a "head and shoulders" formation from the last seven days of trading. This is a strong bear signal if it is not my imagination.

So, the markets are looking for news to break out on. Prices are "consolidating" in a sideways patter, indicating a change to come. We need news to break out on. This is not a good time of year for news. Except for come export reports, the new big thing is the March 31^st Planting Intentions Report. After that comes spring weather speculation.

The plain truth is, the prices are historically high, even if we went a little higher two years ago. This may be the last good chance to sell before the elevators all run out of hedge money again. Or, we may be looking at the high and getting ready to kick ourselves for not pulling the trigger. The clay bird is out there, all fat and orange.

No one has the sure answer to the markets next month, not me, and not Marvin Gaye. Besides, he was talking about long hair and demonstrations.

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