Market Monitor

By Marlin Clark

Grains gain ground again

Grains made new highs in the last week on the Chicago Board of Trade, but show signs of giving it back this week.

Some corn, soybean, and wheat contracts made new highs once again on the Board, but significant losses overnight going into the Tuesday trading have the new highs standing out on the Board. Prices struggled during the day Monday, with lower openings, then a return near the previous day's trading. That now would appear to be the harbinger for a Turnaround Tuesday.

Before the open Tuesday morning, March corn futures are down over nine cents, and the beans and corn are down over 12 cents on the overnight.

EPA made the big announcement Friday of the long-awaited okay for E-15 for cars made 2001 and after. This comes after an earlier announcement of E-15 for newer cars.

The news was met with the usual mix of reaction. Opponents of ethanol say the testing on the cars is incomplete. If I could buy any, I would let you know how it goes in my 1989 Mercury. It has been thriving on E-10, and I am hard pressed to imagine much difference. If it trashes it, my son's mother-in-law from Tennessee better not find out. 60,000-mile vintage cars are hard to find, and she was the source of this one.

Proponents of ethanol, meaning anyone with any sense in the ag community, are cautiously optimistic about the results of more ethanol in gasoline. If all gas went to 15 percent ethanol, we would be using 7.5 billion bushels of corn to produce it. That used to be our entire crop, and is now just over half of the crop.

How, in fact, do you sell E-15, however? I can't imagine every station putting in another pump at each pump complex, and another underground tank. A third of the cars would still be before 2001, like my Grand Lady, so the stations would not want to give up selling for them. Could they put in one accessory pump over on the side for low-ethanol gas and charge a premium, like they do for kero? And, even if the stations saw a way to do it, we don't have enough ethanol yet. However, the demand would give one more boost up to corn prices.

Ethanol does not have a lot of fans outside the ag community. We say that it helps our pollution problems, but the clean-air arguments can be made from both sides. It is true that the first slug of ethanol demand came when ETBE was outlawed. The big objection to ethanol is more personal. Even some of my conservative commentators argue that the ethanol boom has caused food prices to go dramatically higher all over the world. I have sympathy for the Mexican peasant who is eating his way through (they forget to notice) the US supply of white corn, none of which goes to ethanol. I know, the prices are run up just the same. However, this begs the old question of why exactly it is the farmer's responsibility to provide cheap food for the world if there is a way of making his product worth more? I don't see Shell and BP lining up cars at their stations to sell gas at half price for the good of the consumer.

Looking for a moment at the prices, we see that March corn futures made a new high on January 21^st at 6.67. This morning it is back to 6.46, 21 cents off the high. November soybeans made a new high at 13.64 on Monday, but is now 13.23. The old beans made a March futures high of 14.32-1/2 back on the 13^th, and have been mostly sideways since then. Current trading is at 13.92. This would indicate the old beans have run out of steam, but the new are rallying to get closer to the old crop in price. In corn and in beans, next year's prices are significantly lower.

March wheat futures made a new high of 8.39-1/2 Monday, and have held most of the gain. We are now at 8.35-1/4 on the March.

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

Finally some news comes to the markets

Wednesday the 12^th USDA will finally release the whole wastebasket of news on this market. We wait with abated breath the results of their research to see if the trading of the last couple of months makes sense. Then, we anticipate the reaction to the reports.

Wednesday, of course the day after I have to write this, USDA will give us five reports of interest. They will come out before the market opens, and trading until then will be interesting. Trading after then will be manic or subdued or placid, depending upon any surprises in the reports.

The market sometimes hangs on the January reports because of lingering uncertainty about the actual crop sizes. I do not have the sense that we are all that anxious this year, but there is always the chance of a reaction. Wednesday we will see the final Crop Production Report. Along with that will be the Crop Production Annual Summary.

By this time we supposedly have all the corn and beans in a position to count them, and have counted them well. We know now what acres were abandoned, and what acres were amazing or disappointing. But, any change from current assumptions can move the market.

More interesting in principle is the World Supply and Demand Report. This will be torn apart as traders look for something unknown or changed to move the market. Ditto for the Grain Stocks Report. Are there any surprises about what is left in the bin? Since we are early in the crop year we are only looking at the chance that usage is slower or faster than expected, or that exports have varied.

Last in the list is the Winter Wheat Seedings Report. What acres are out there? Is the report consistent with expectations?

Then the games begin. At 10:30 our time the markets begin to react to whatever news is gleaned from this mess of information. AS usual, the news is not the thing, it is the twist that is important. Maybe the crop size is off a little from last month. Does that matter, or was it already in the market? Is there more wheat in the world than we realized? Is there less wheat, but that is why wheat has rallied back to the high? Of course, wheat is now 50 cents off the high, so what does that mean?

And on, and on. As usual, I like to get positions as even as possible and bet nothing on report days. I have encouraged sales, especially of corn, ahead of the report. By the time this is read, we will know if that was right.

This week prices on the Chicago Board of Trade have continued the erratic pattern of the last few months. Corn finished the lastest leg up and then made a big correction. The real recent low was back the end of November at 5.20-1/4 for March futures. The high was the first trading day of the year, at 6.34, nearly $1.14 higher. By the 7^th, however, we were back to 5.95, a break of 39 cents. The last two days we have seen a bounce from the correction to the overnight going into Tuesday at 6.12.

The March beans have been mostly higher since the mid-November low at 11.83. We made the New Year's high at 14.09, $2.26 higher! Amazing! We are currently at 13.85-1/2.

The wheat rallied from the mid-November low at 6.56-1/4 March futures to 8.25 on the 3^rd of the year. After a bread to 7.66-1/4 we are trading 7.76 currently.

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

Hesitation in corn uptrend

The chart is beautiful. Corn goes up, up, up. Except, today it hasn't on the overnight.

Every time a big uptrend hesitates we start looking for signs of a top again. Here we go. March corn has made higher highs on 22 of the last 29 sessions. Each time there was only a lower high for one day. That defines a strong uptrend with little sign of a break. So far we would have to think that today, Tuesday before the open, is just another one-day breather.

Still, the air is getting a little thin here well above $6.00. Just before the New Year a good friend called from the Finger Lakes. "What do you think?" he wanted to know. "John," I told him, " I am going to tell you something I have said to no one so far. Sell everything you own or have nerve to sell ahead in the next two weeks!"

John is savvy. He knows what his corn costs to grow. He knows history. He knows the agony of watching good prices go away. This is not his first marketing rodeo. He knows if prices go up a buck, he sold well, if not at the top.

He also knows the farmer mentality, even if he is one. He told me he was talking to a neighbor who was sitting on corn about getting sold. "But what if corn goes up 50 cent more?" the neighbor told him.

I remember $7 corn from 2008. I remember I could not buy any because we, like every other hedged legitimate trader, could not risk the margin calls. When the specs ran things through the roof, the cash corn traders had to sit on the sidelines for three months while corn made a high and crashed. Here we are again, maybe with plans that allow us to cautiously buy corn, but scared of another dollar a bushel set to Chicago.

The corn producers that are afraid to sell should be glad they are not using the corn they produce. How do you make meat with $6.50 corn? How do you make ethanol? How do you get the user to forward contract when he is spending his time hoping prices go back down before he has to buy anything?

Looking at the numbers, March corn futures had a low on November 23^rd at 5.20-1/4. As of yesterday, Monday, we were briefly $1.13-3/4 higher, at 6.34. That is amazing, even if we were lower overnight.

The March soybeans had a high at 13.54-1/2 on November 12^th, then dropped to 11.83 five days later. Now we were 14.09 the first trading day of the year, evn though we have faded 28 cents off that on the overnight and through the day yesterday.

March Chicago wheat futures traded to 8.25 on a spike Monday. The close was 8.05-1/2, and we are slipping below that overnight. Still, two weeks ago March futures were 7.42. Six weeks ago we were 6.56!

Volatility in grain prices is the mechanism that allows the producer to lock in good prices. We have seen a lot of volatility, and are at the tops again. It remains to be seen if we will see another round of farmer selling.

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