Market Monitor

By Marlin Clark

Party getting old in Chicago

All those old clichés come to mind. Stick a fork in it—it's done! The party's over! And a reminder of the ugliest graffiti from Saigon, circa 1974: "Would the last American in Vietnam please turn out the light at the end of the tunnel!"

I think of those sayings as I study the grain charts this morning. Prices have turned, not just sharply lower, but ugly lower. Maybe, butt-ugly lower! It looks like the big move is over, with big losses in the last few days and weeks.

I am reminded of one of the strong axioms of this business: the top is in when everyone thinks prices have to go higher. That was the mood only a few days ago. All the talk was about how tight the carryout in corn was getting. Traders were spooked that we could have a spotty spring, take a little off the corn crop, and make new highs in corn by dollars, not cents.

So, what has changed? All the outside markets seemed to be helping grain prices. The weak dollar, the high crude price, the Libyan situation were all cited as reasons for high prices. To my mind nothing has changed there. We have just stopped getting new news to feed the bull.

Now the focus of the world is on Japan and the catastrophe there. 10,000 people may be dead, and two nuclear reactors are still threatening to melt down. A million people are homeless, and the best we can say is that the Japanese are used to handling these problems and at least it is not as bad as the Indonesian tsunami. No, it is not. Maybe 200,000 died in that one.

And, we now try to decide if the Japanese mess should effect prices. I don't know. I don't know why we went up so high and down so hard, either. I am just trying to rationalize it after the fact.

Let's look at the actual numbers. The May corn futures dropped 17-1/4 cents last night, going into Tuesday morning. We closed on the low, at 6.48. That is most of a dollar below the high made three weeks ago. Of course, that high was a fluke. We made a low the same day, 40 cents off the high of 7.44-1/4.

At the same time the soybeans were crashing, but have actually been better the last two days. May bean futures were at 14.67-1/2 in early February. In two weeks they dropped to 12.96-1/4. The next two weeks took them back to 14.24-1/2. Now we hada Friday low of 13.05. So, we were down $1.71, then up $1.28, then down $1.19. That pretty well defines volatility.

The wheat market has been easier to chart, but more confusing. All the talk has been about tight world-wide supply. So, of course we crash. May wheat futures are down $2.31-1/4 as of this morning, to 6.94/1/4. Someone has to explain that one to me. Did we just get too high, whatever the supply?

Still, I keep listening for the sound of my all-time favorite market song. That would be, "It's Over!" I don't hear it, and I am not totally convince until I do. What if the specs were right, before they gave up for now? What if we have some spring problems? Maybe, from this height, it will just bring the new crop up to even with the old.

Maybe corn futures are losing their convergence with futures, like wheat did a couple of years ago. A lot of questions, and not too many answers.

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

Rally returns with a life of its own

Even one of the strongest of chart signals did not permanently break the corn rally last week. This market has not been shot , stabbed, or bludgeoned into submission so far. It has a life of its own, maybe helped by the outside markets.

While petroleum futures were making a record one-day move in reaction to chaos in Libya, corn prices were fighting off an "outside day" to keep the 3-month craziness alive. Last Tuesday May corn futures made a wild new high at 7.44-1/4,24 cents above the Monday close. It then turned around and crashed, posting a 6.90-1/4 close the same day.

This defines what the technicians call an "outside day," and, in this case, an outside day down. That is, the market traded higher than the previous day's high, lower than the previous day's low, and, in this case, closed at the low. This defines a negative chart signal. It does not get worse than this. By this indication, the party is over.

Except, it wasn't over. Yes, we followed with a lower day, trading a range of 6.67-1/2 (almost 77 cent off the high of the day before) to 7.04-1/2. We closed at 7.02-1/4, near the high. That was twelve cents above the previous close. We followed with one day a little lower and two sharply higher so that, here before the day's open on Tuesday again, a week later, we are back to 7.31-1/4.

Al that to say that we have fought off the outside day and the chart remains bullish. It is hard to say what part the outside markets have in this dip and rebound. Certainly the focus of the news has been on potential oil shortages as the Libyans don't go to work in the oil fields. Talk a couple of days ago was that tankers are bobbing around in the Med, waiting for workers to show up to load them at Libyan ports.

I would appear that Quadaffi will have to give up leadership, but he hasn't. A rope, a bullet, or a jail cell awaits him, and he is holding off the rivers of change flowing toward him. Six months after he is gone we will have some stability in oil production again, and we will know what it did to corn prices. Now we can only speculate.

It would seem that crude is rising faster than corn, so ethanol is getting more profitable. The poor sods need something, when they are trying to made gasoline out of $7.00 corn. We are in the process of proving to ethanol haters that producing fuel from cornfields will starve all the poor of the world. So far we are just starving the livestock producers.

A look at soybean futures proves that this is a corn rally. The corn has only been able to pull the beans so far. We made a May futures high on February 9^th at 14.67-1/2. (Beans in the teens! We are getting used to these prices.) By the 23^rd, however, we had dropped most of a buck and a half, to 13.33-1/4. We have rebounded, to 13.99-1/4 on the 25^th, then dropped again. The overnight close was at 13.70-1/2—basically a buck off the high at the same time corn is back near its high.

The Chicago wheat futures have performed more like the soybeans than the corn. The May futures high was February 9ty, at 9.25-1/2. The break was to 7.56-3/4 on the 23^rd, a change down $1.68-3/4. A good bounce since then has us trading 8.12-1/2 just before the Tuesday day session opens.

Draw your own conclusions from some of this. It seems the corn is trying to pull beans and wheat higher, but can't succeed at the extremes. I keep thinking the corn has to stop its meteoric climb. But, the March 31^st USDA Planting Intentions Report is still ahead, and then the spring weather market kicks in. Traders are focusing on the disappearing corn crop and worrying about getting a good start with a lot of acres. The market will not stand to be disappointed by either acres or conditions.

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