Commodity Markets- Trends and Trading Ideas

2011-03-15T10:30:00.001-04:00

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.

2011-03-01T10:06:00.001-05:00

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.

2011-02-15T08:57:00.001-05:00

Market Monitor

By Marlin Clark

Wild ride continues in Chicago

Fueled by USDA carryout projections that get smaller every month, corn prices have led the markets higher on the Chicago Board of Trade. The reality is that supply is going to get tighter as the market year goes on. This is driving corn prices toward the record highs of the 2008 year.

March corn futures made a new high Monday at 7.10-1/2, then dropped nearly 15 cents to close more than a dime lower on the day. Once again this gives us a chance to think the high is in. Once again the reality is that the swing just represents some short-term volatility and may mean nothing.

The new high represents a $1.15-1/2 gain in six weeks for the old-crop corn. It is the highest corn price since the 7.65 posted in June of 2008. That year we had a similar pattern of worrying the carryout down. We had the booming ethanol industry kicking up more demand than anticipated as more and more plants came on line or were projected to come on line.

This year it is more of the same, as demand is driving the corn wagon. It is hard to believe that this does not stop. As a trader trying to sell corn, it sure feels like this market has to come to an end. When there are no buyers, there is no trading. But, it felt like that in 2008, also. The end users will contract what they want next week, and there is no opportunity to sell ahead at the high prices, except to sell futures. That exposes us to unlimited margin calls.

While the corn futures go higher, the beans have actually traded off for several days. We have been down four days off the February 9^th March futures high of 14.55-3/4. We are currently overnight on Tuesday at 13.97-3/4. That is 58 cents off the high, which used to mean something. Now we just look at it as normal volatility. Still, it is significant that soybeans are lower, and ran out of steam following corn higher. The last beans low was at 13.64-1/4 near the end of January.

Wheat futures continue higher, but not every day. Five of seven recent days were higher, and we made the high last Wednesday at 8.93-1/4, more than 70 cents above the January 31^st low. We are currently 8.64-1/4 on the March contract.

So, we have some conclusions to me made. Is this the high? I don't know. Is this high enough to sell grain? Definitely, but it is getting harder to find someone who wants it. Will we remember this year for a long time? Maybe. The ethanol industry has changed everything, but the prices are now high enough to hurt the energy producers. That is not good long-term.

Meanwhile, we are now within sight of the real fundamental news of the winter, which is the March 31^st USDA Planting Intentions Report. Yesterday we got a glimmer of hope that the groundhog was right and we will get an early spring. My road melted down to the pavement before the sleet started again in the early evening. The six-foot snow plow piles will be with us for a month, regardless of weather, but the tile roofs on our house is bare. The avalanches woke us up a few times in the night, and left a pile in front of the garage that requires the all-wheel-drive car to conquer. I am not looking for any robins just yet.

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

2011-02-08T09:51:00.001-05:00

Market Monitor

By Marlin Clark

Bull market continues to bellow

Grains made new highs over the last week on the Chicago Board of Trade. The bull market continues to bellow, even though it is having trouble catching its breath at this high altitude.

Traders are looking at historical charts trying to decide how high we can go. Producers are wondering what to do, worried that they sold this crop too early. They don't want to repeat that for the new crop. Jobbers are wondering where the next margin call comes from, and fading basis to give themselves some protection. End users are questioning why they wanted to feed chickens or distill ethanol.

Markets like these put the fear of the Lord in everyone. (As in, "Please, dear Lord, don't let my banker know I used my hedge account to go long some soybeans!" Please, dear Lord, if you get me out of this corn short I will never talk to my broker again." Please, dear Lord, let the elevator forget I contracted that corn for 4.15.")

A little volatility is great for everyone. At the lows, the users get a chance to price. As prices go up, the producers get to price. Over the course of the swings, the cash traders get to buy high, sell low, and use hedges to make money on the swings.

A lot of volatility is tough on everyone. It is about to get tougher, like it did two years ago. Bad things happen when prices get high. Every hedged trader runs out of margin money and has to stop buying corn. It is always easier at high prices to buy corn than it is to sell it. Producers want to sell for next year, and the trader decides he cannot commit his line of credit to any long-term hedges. The end users don't want to buy any deferred grain because they are hoping it will be cheaper by the time they really need it.

Associated with the margin calls is a slowing down of pay in the entire business. The end users want six weeks now, and the margin calls mean a trader can't dip into his own money o keep payments fast.

So, soon the farmers will decide the prices are high enough, only to find that no one wants to buy the grain if they have to hedge it. The cost of carrying the hedge is too great compared to the chance for a profit. This happened two years ago when futures on corn got into the $7.00 range. I remember all the complaining. "But you have to buy it!" (No, I don't. I am not providing a public service at the risk of my company.)

Anyone selling grain to a cash trader needs to understand what his position in the market is. For example, I am a hedged trader. I am not interested in risking price change. If you want to sell to someone who does not hedge, be aware that if the market changes, he cannot afford to honor his contract with you.

If I buy corn, I have to sell futures. If I buy 500,000 bushels of corn and the price goes up a buck a bushel, I have to send $500,000 to Chicago for the privilege of buying your corn for a small margin. This can only happen so long. The bigger the trader you are, the bigger the problem you have. This is why, in 2008, everyone stopped buying. We are about to that point again. Traders will be buying for March, but not for November. Then, they will not be buying at all.

Looking at prices for the week, March corn futures have gained most of a dollar since the January 7^th low of 5.95. February 7^th the high was 6.82-1/2, but by the overnight going into the 8^th we are back to 6.69-1/4. So, a small break, and the fear the top is in again.

March soybeans are similar, with a 14.52-1/2 high on the 3^rd, then a break to 1416 Monday night. Chicago March wheat futures also made a new high the 3^rd, at 8.72-3/4. We are now trading 8.57, but we have come a long way from the January low of 4.59-1/2.

So, the corn made a new high in the last few days, but not the beans or wheat.

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

2011-02-01T10:10:00.001-05:00

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.

2011-01-25T09:56:00.001-05:00

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.

2011-01-11T10:20:00.001-05:00

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.

2011-01-04T10:01:00.001-05:00

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.

2010-12-28T10:06:00.001-05:00

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.

2010-12-21T10:32:00.001-05:00

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.

2010-12-07T10:34:00.001-05:00

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.

2010-11-30T10:09:00.001-05:00

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.

2010-11-22T08:57:00.001-05:00

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.

2010-11-16T10:08:00.001-05:00

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.

2010-11-09T13:44:00.001-05:00

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.

2010-11-02T10:37:00.001-04:00

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.

2010-10-26T10:25:00.001-04:00

Market Monitor

By Marlin Clark

Corn market steady by jerks

Picking the top is an inexact science, mostly defined after the prices go down and the top is apparent.

Regular readers have watched me struggle to study the price movements the last few weeks. I am glad to have been able to provide a little humor as you laugh at the struggle.

Once again it is Tuesday morning, and once again I am trying to pass on insight that I don't really have. Prices are sharply lower on the overnight trading, but does that mean anything? The corn has continued to trade above the report gap, but with weakness apparent on some days. Meanwhile, trading seems to be focused more on the soybeans, with trade there still in an uptrend.

November soybeans gapped from $11.35 to $11.50-3/4 the Monday after the USDA Crop Production Report. It continued an uptrend, making a double high of 12.23-1/2 on October 21^st and again on the 25^th. It is currently trading 12.12-1/4, down 5-3/4 overnight. Volatility is such that being a dime or so below the high does not mean anything.

It continues to amaze me that the big bean crop is being discounted into higher prices. On the one hand, these are great prices, and when they come at harvest they may be the high for the year. On the other hand, everyone is cautious about being short. Soybean futures have gained most of $2 in this month so far. USDA cut the production number a little, but this seems like a huge over-reaction. I have to remember that the market is always right.

December corn futures continue to consolidate above the gap. This so far continues to feed the island formation, which is a pattern of trades above the trend line, separated by the report gap, the blank spot on the chart left by the reaction to the USDA report. As discussed a couple of weeks ago, this can be a dangerous formation. We can fall back through the gap to sharply lower prices, or we can use this as a staging ground to go higher, and there is no island.

Prices have had strong volatility, but have stayed in a range of 5.50 to 5.85 for the most part. That is a big range, but price change means nothing within that until there is a change of direction. Prices are thus "steady by jerks."

Right now it feels like the beans are holding the corn up and the corn prices will fall when beans top out. Then again, I may be wrong.

The wheat futures continue to stagger along, held up by the other grains. They are forming somewhat of a pennant, as the trade volatility stays in the same range but gets smaller. So, we will see a trend change soon. That can be up or down.

This time of year the wheat gets ignored, as most elevators will not touch it while being buried in corn and soybeans. Farmers who are watching and wanting to sell next year's crop will discover that, in these times of margin call mania, traders are reluctant to book anything and basis is historically weak.

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

2010-10-19T10:08:00.001-04:00

Market Monitor

By Marlin Clark

Hunting the tops at harvest

Grain markets on the Chicago Board of Trade continue to hunt chart tops, even as combines roll. This defines the concept of "contra-seasonal," as we normally are weak at harvest.

Grain prices continued to press higher after the October 8^th USDA Crop Production Report. As discussed last week, that surprised the market with lower corn and soybean crops than expected. In the case of corn, the crop was cut four percent and is no longer expected to break last year's record.

Normally I expect a crop report to be a "one-day wonder." That is, we adjust prices based on the new expectations and go on. Sometimes we go higher with lower production. Sometimes we go lower with higher production numbers. Sometimes we go the opposite of the expected move because the change is there, but not as big as expected. Still, we correct in one day, then the trading moves on.

An exception comes when the surprise is large. In this case, markets were limit up Friday the 8^th, so all the pressure was not relieved. Since the report came on a Friday, the limit moves could have been considered an overreaction by traders not wanting to be exposed over the weekend. Fortunately, Columbus Day was not a trading holiday, which would have made the situation worse.

It would not have been a surprise to come back in Monday and actually trade lower. I expected to trade lower by the end of the day. I was wr..wr..wrong. Markets had follow through that is only now working its way out of the market, a week later.

Here on Tuesday morning before the day session has started, we are sharply lower on corn, soybeans, and wheat from the overnight session. December corn futures are off more than a nickel, beans are down 14 cents, and the wheat is off eight and a quarter cents. This is a nasty change in prices, and gets all three commodities to the bottom of the range traded since the report.

Corn and beans left large gaps in the chart by the spurt higher Friday. This gets the technicians a chance to get excited. We have now traded seven days above the gaps, counting the overnight Monday/Tuesday. If we should gap lower, we would have created a very dramatic formation—the island top. This is represented on the chart by several lines above the chart that look like an island, not connected to the rest of the chart. I would be extremely negative. It is also unlikely, given that the overnight did not start the gap, but has traded down into the gap, as did the trade yesterday.

Next in negativity would just be lower trading that would fill the gap. That is, a return to the levels we had before the Friday reports. That would mean we had absorbed the report and the excitement was over.

It remains to be seen where we are going, but the chart formation demands it be defined soon. If we turn higher without filling the gap, we have defined a bullish move instead of a bearish one. And, we have defined it at a "contra-seasonal" time.

Looking at prices, December corn gapped from 5.28-1/4 to 5.55 Friday, then traded as high as 5.88 on last Wednesday, the 13^th. We are now at 5.52, back into the gap. Soybeans gapped from 11.35 to 11.50-3/4 Friday. We hit the high of 12.04-1/4, a very high significant number. Twelve dollar beans! Now we are at 11.70, which is well above the gap. The case can be made that this is now a bean rally, and beans have not turned negative, since they are still trading above the gap.

The wheat was up 60 cents Friday to 7.39-3/4, but that seems to be just in sympathy to the other grains, and a mere blip on the slow stairstep progression to lower prices. We are now 6.81-3/4.

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

2010-10-05T10:28:00.001-04:00

Market Monitor

By Marlin Clark

The old gray mare has loped in

The old gray mare, she ain't what she used to be. You know the one—she galloped in and got you all excited about how fast she was, then ran out of steam. No she looks like a nag you were a fool to bet the farm on. She looked like Secretariat's great-granddaughter, but now you realize she was overdue for the Amish auction. (Maybe that was too obscure. Many of the Amish buggy horses come from racetrack auctions of horses that have run out of steam.

The old gray mare this week is the grain markets that have broken badly and are barely showing signs of recovery with small gains Monday and Monday night/Tuesday morning. Maybe "broken badly" is an understatement, Just how do you describe the market action that takes 72-1/2 cents off corn, 1.02 off soybeans, and 1.13-1/2 off wheat in just a few days?

This is a mare that stumbled in the backstretch, broke her left forefoot, and could not finish. No, wait, that actually was a horse in the Breeders' Cup a few years ago! They put a tent around him for the sake of the queasy onlookers, put him down, and carted him away. Not a pretty sight. About like trading grain the last few days. Some days I am glad I am working in the "tent" of my office and not in the pits in Chicago in front of God and everybody.

In case you were running beans and missed it, this is a market that will be remembered for awhile. In fact, it will be some time before we have a coherent reason for the break. That is my challenge this morning.

First, look at the prices. We always say that a high price at harvest is the high for the year. That was true until two years ago when the reality of ethanol demand kicked in and gave us a higher market after a high harvest.

Right now you can make a case for a harvest high right at the start of harvest. December corn futures rallied after the government Supply and Demand Reports of a week ago Thursday. The high came the next Monday, with December corn touching 5.28-3/4. First we had looked for the any futures to touch $5 as a landmark, but the market did not immediately collapse when it happened. The trading held on until all the contracts were well over the benchmark.

Then, the selling kicked in an accelerated. Monday we closed down nine cents on the day, and 16 cents below the high. Tuesday we actually gained a nickel, as traders took the adjustment into consideration. However, Wednesday the contract was down nine and a quarter cents, and that led to the limit-down 30-cent drop on Friday.

We made a low Monday at 4.54-1/4, and I think it was in the overnight trading. Hard to keep track of these quick adjustments some days. Whenever, that represented a high to low of over 72 cents in a few days.

Similar action in the beans dropped us over a dollar., to a November futures low of 10.42. We are back to 10.60-1/2 in the electronic trading early Tuesday. The wheat appears to be a different matter, with fundamentals there not suffering the surprises in the other grains. The chart looks flatter. Look more closely, however, and that is just because the high at 8.68 in early August has compressed the chart. Run the numbers and wheat has lost more than a dollar since September 20^th.

Pick your reason for the drop in corn. USDA came out with a Grain Stocks Report that showed 1.7075 billion bushels left over on September 1^st. That is several hundred million bushels higher than trade guesses. Analysts immediately discounted the number, and maybe even trading those feelings for two days. The argument was that we had an early start to the harvest, and that meant we had a goodly amount of 2010 crop corn counted as carryout of the 2009 crop. Two days later the trade started trading the USDA number.

Then, the corn harvest so far appears to be confirming the USDA record crop projections. The traders were convinced USDA was too high, but they are losing their nerve.

Then, there is just the contra-seasonal impact of the market. It is the wrong time of year to rally corn, and the pressure of harvest helped break prices.

It remains to be seen if the high is in. If it is, most farmers are way undersold. Traders talk of this percentage and that retracement. No heroes have emerged to swear that this is just a hiccup.

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

2010-09-30T10:07:00.001-04:00

Market Monitor

By Marlin Clark

Whoa, baby! Hot! Hot!

One of our family stories involves number one son in a restaurant tasting his soup. The attractive girl going by our table was surprised to hear a 12-year old blurt out, "Whoa, Baby, Hot! Hot!"

I thought of that yesterday as I watched the attractive corn prices go by my screen. I have to admit to surprise checking the overnight trading and seeing a quote over $5.23 per bushel. Whoa, Baby! Hot! Hot!

The speculation for the last few days and the last thirty cents has been if we could break $5. When we got to 4.70, we were looking for a break, but the market watchers were speculating that we could go to 5 just because it was there and we were close. So, we made a run at the $5 and hit it overnight going into Monday. We not only got there, but we got a little momentum, maybe from hitting buy stops set by speculative traders, and spurted nearly 25 cents higher.

So, now we are looking for direction. The magic number has been hit. Last week the idea was that we could touch it, then crash lower. Yesterday the talk was that we could go right to %.50 with the momentum we had. In fact, early trading took the overnight prices lower. By the end of the day we closed down a nickel. The overnight into Tuesday as this is written is not quite even, at 5.07-3/4 December Chicago futures.

At the same time, soybean futures were also higher on the overnight going into Monday. We gained over 66 cents from the Thursday low of 10.33 November futures to the Sunday/Monday overnight high at 10.99-1/2. For all intents and purposes that is the staggering target of eleven dollar beans, and represents an on-farm price of ten dollars or so—maybe more, depending how close the producer is to a processor.

Since the high we have drifted lower, but still posted a high overnight going into Tuesday of over 10.93 November and a close before the day session of 10.86-1/4. We are up not quite two cents as we wait for the open.

This action on the grain markets defines what we call a "contra-seasonal" market. That is, the seasonal history is that prices decline going into harvest, but we are seeing improvement. The reasons for this continue to be the same as we have discussed for the last few weeks. First, the market is not convinced that USDA's record corn crop is actually there. Second, the market sees exciting demand in worldwide markets.

Demand from Europe has been the dominant feature of those who say the market is now demand-driven and not supply-driven. We are shipping corn east to replace the feed grains that were not grown in drought-ravaged Russia and Ukraine. The exports that the FSU would normally push into Europe are going to come from us instead.

Hidden in the demand picture is another factor that may be driving prices. The rumor abounds that this week Ag Secretary Vilsack will announce E-15. That is, blenders will be allowed to sell gasoline that is 15 percent ethanol instead of ten percent. It remains to be seen if this is just a rumor, although the ethanol people have been promoting it for a couple of years, ever since they got enough capacity to get to ten percent in all gasoline. It also remains to be seen if it is a cause of the current rally.

While futures prices are moving higher, basis is dropping as a reaction, and as we make the transition to new crop. Silos are full of high moisture corn, and combines are turning out corn in the low 20's in our area. Bean harvest is in full swing. Yields are what have been expected. That is, there is huge variance between farms. I am hearing of 77 bpa beans, but beans that are only 18 inches high from moisture stress only a couple of miles away.

So, the trend remains unknown, and prices are volatile. The rule of thumb is, the high price at harvest is the high price for the year.

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

2010-09-14T09:57:00.001-04:00

Market Monitor

By Marlin Clark

Another Tuesday, another confusing turnaround

Once again it is Tuesday morning and I am trying to make sense of an exciting week. Once again we have made new highs, then traded lower in the overnight electronic session ending early Tuesday morning. Once again I get to say what is going on without really knowing. Just like everyone else you read, only I admit it!

Grain markets have decided to trade the Friday USDA reports as bullish, even though the news in them was already being traded. The result is a run at $5.00 futures on the Chicago Board of Trade. July and May contracts each had highs Monday at $5.02. December futures hit 4.86-1/2. This was 16-1/2 cents above the Thursday close, and 22 cents improvement in ten days.

The USDA Friday before the market open released several reports. They now say our corn crop will be 13.2 billion bushels. They reduced the guess 250 million bushels, but this would still be a new record. It would break the 2009 record of 13.1 billion bushels.

Just think about this. We are having two record crops in a row, if USDA proves correct, and yet we have surged prices to near $5 levels. What gives? Hate to repeat, but the fundamentals and the emotions remain the same in the pits. First, traders are not convinced the bushels are there. They think the crop is smaller than the USDA numbers. The, we have a demand-driven market. That is, the market is more concerned with how much corn is needed than how much we can supply.

The demand side has been driven the last five years by ethanol demand. We have continued to ratchet up acres and total corn supply and the market has responded with higher prices at the same time. This year the increase in demand is helped by Russian wheat problems. A significant portion of their wheat crop comes back into the EEC countries as feed wheat. That will not happen this year, given the small wheat crop due to record drought. This year the Russians will eat the feed wheat.

The response to the need for feed was the EEC deciding that maybe they could feed our "Frankenfood". That is the derisive term for crops grown from Genetically Modified Organisms (GMO). The greenies there had shut off imports of our crops when we "contaminated" supplies with GMO's. They believed that it was not nice to fool with Mother Nature, and the grains would not be safe.

Now we are way past contamination, and the bulk of corn and soybeans come from GMO seed. This has been a boon for production, but has limited some exports. Now the Europeans are hungry, and they have approved six varieties of corn for import, and have imported the first vessel.

This is very good for the future. For now, it is supporting prices in another big-crop year.

The mood in the pits has been less than euphoric, but has mainly expressed the reality that traders will want to run at the $5 level now that we are close. Talk has been that we could hit that, then crash. Now we are studying the reality of what does a run at $5 mean? If it is in any month, we are there, and this is Turnaround Tuesday. If it needs to be in the nearby month, we have one more leg up to gain. So far I am not hearing talk that the bounce lasts beyond that.

I am reminded of the comment of one trader three weeks ago, however. He said that, whatever low we made (which we made shortly after his comment), it would be the long term low. Prices would stay above that for a long time.

Maybe so, maybe not.

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

2010-09-07T10:13:00.001-04:00

Market Monitor

By Marlin Clark

The fat grain buyer is quiet

Bill Barnett says I was wrong about my thinking last week. I said, "It's not over until the fat farmer combines!" Meaning, the market top is not in yet. Bill says it's not over until the fat grain buyer sings, and I'm pretty sure he was talking about me.

Now, Bill was at my karaoke birthday party last summer. He knows what everybody who has seen me in the last thirty years knows, and he has also seen me sing. And, he is right—I haven't been singing. Oh, I keep chirping about the high being in every time we get a peak in prices. Then, we trade off a few days and come back to make new highs in corn. No singing in there anywhere.

Once again this week we made new corn highs. Once again as we go into Tuesday morning the overnight is sharply lower, and I start thinking the top is in. I'm not singing about it, however. Is this a mood change, or just a knee-jerk reaction to the highs we put in on Friday, when we were worried about the long weekend?

Friday corn made a new high at 4.67 December futures. We saw a 21-1/2 cent range and closed 17 cents higher. This leaves me scratching my head, as the end of the rally is frequently the biggest day. So, was this trade a reflection of the long weekend, a blow-off top, or just one more big day up?

It is no surprise that Tuesday morning, as this is written, the December corn futures are down 5/1/4 cents. Interesting to note, however, is that we actually made a new high on the overnight, at 4.69. Just to prove my humility, or to make an attempt at it, I should point out that when we made the spike high on wheat overnight on the 5^th I said that the sympathetic corn high was phony and would remain the high, at 4.38-3/4. So far I am wr, wr, wrong, by30 cents.

Chatter from Chicago this morning is about the near-record long position of traders in Chicago. This is the biggest number of long contracts and options in two years. That is an indication that the bull really needs to be fed, and that we are running out of the ability to trade longer forever. We could trade this as a long-term high, or it could be another stepping stone. Advice from the floor this morning is to use puts to protect against prices falling.

While corn has made new highs, the soybeans have not. Beans have traded in sync with corn, but without as much volatility. Thus, soybeans were up 26 cents overnight going into Tuesday, but the high was 10.41-1/4, still off the 10.49 spike high of the 5^th. The overnight session close for the November futures was 10.35.

Wheat futures continue to look for direction after the precipitous breakdown in prices the 6^th of August. Remember that we turned around $1.20 at one point that day. December wheat futures are off 12-1/4 overnight. We are 7.29, $1.39 off the high. The good news is that we have bounced 52 cents off the bottom.

Traders continue to be focused on crop news as they try to determine what our corn, especially, is going to turn out. A remark heard this morning was that USDA might raise the corn yield number, but the trade would not believe it. The bias in Chicago still seems to be that the corn crop is suspect, and demand is going to be more than allowed so far in the USDA Supply and Demand Report. Consequently, the market is still bullish.

And, I am holding off on the singing. Of course, when I do sing, it will be the traditional call of the grain trader. That is Ray Orbison's "It's Over!"

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

2010-08-31T10:20:00.001-04:00

Market Monitor

By Marlin Clark

It's over when the fat farmer combines

Forget the fat lady singing. It's the fat farmer you have to be watching. They are not all as lean as Dean Miller and John Wallbrown.

This year all the yield guessing and market watching comes down to what happens when the fat farmer runs his combine. Either he is surprised for the good or surprised for the bad or he is satisfied he was right all along.

Well, "satisfied "might be an exaggeration. It kind of goes against type. Pappy always told me, nothing was ever any worse than a farmer said it was!

I say this as an observer who has been trying to pick the top of the corn market for a long time. Every time I look at the chart and tell you we just saw the top, we dip a little and come back. Monday we broke through the phony high made two weeks ago when the wheat futures were limit up overnight. At that time I said that the corn only made the December futures high at 4.38-3/4 because it was pulled up when the wheat was locked limit up. I said it was a spike that would show on the chart for a long time.

Well, Monday we broke to a new high, at least for more than a year, of 4.45-1/4. We traded above the spike on three different days. The overnight close going into Tuesday trading is at the last high. So, what is happening?

It has to be that the market is still uneasy about the crop size. The southern states are harvesting, and many places have record yields. Mixed in with them are scattered reports of results sharply lower than last year. No trend is in sight. Get the farmers moving in Iowa and Illinois and we will start to have some confidence in the outcome.

You have to love the mood changes in the markets. Early this season all the talk was that the record early planting would result in a record crop. Now, with harvest at hand, I read a report this morning that the early harvest was because of leached nitrogen in all the rains. My opinion is that the early harvest is because this year, when we planted early, we also got warm weather in May. The corn grew all month, and the early planting meant something. The growth in May was a result of heat units, and the total heat units determine harvest date.

So, it seems we are making highs just before harvest and positioning ourselves to have a bust in prices. Make that a Pamela Anderson bust in prices—phony and inflated with anticipation, smaller than expected when all the market news implants are taken back out.

Looking at prices, The December corn futures demonstrated pre-harvest volatility with a high of 4.37-1/2 on the 19^th, then a low of 4.15-1/4 on the 24, followed by a high Monday at 4.45-1/4. Down 22, up 30 in a short time.

While that was going on, the beans finally put in a dip after a long uptrend.The November futures high was at 10.49 on the 5^th of Aug. Since then we have seen a low of 10.11-1/2, a high of 10.48-1/2, a low of 9.93-3/4,a high of 10.34 on Monday, and are now trading at 10.13-1/4. A lot a volatility without a new high like we had in corn.

The wheat, after the big break, has been sideways, with significant range some days. We broke from 8.68 December futures the overnight of the 6^th, to 6.88-3/4 on the 18^th. Last night we finished at 7.02-1/2.

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

2010-08-24T10:15:00.001-04:00

Market Monitor

By Marlin Clark

Rain markets break from highs

Prices on the Chicago Board of Trade have broken sharply on the overnight trading going into Tuesday morning, as this is written. Corn, soybeans, and wheat have all traded dramatically lower, leaving the highs of the last few days behind.

I had to do some quick mental calculations when K-2 called from the Farm and Dairy for my prices this morning. We publish prices based on the close of trading at 2:15 EST Monday. Those have now gone away. On Thursday the readers look at those prices and have to be reminded of the disclaimer that the reader has to confirm them with the buyer.

K-2 is not to be confused with the second highest mountain in the world. That is the sobriquet I give Kristy Foster, the second reporter of that first name name at this paper. Thus, K-2, get it? Did the first one spell it Kristi, or is that my imagination?

So, this morning corn is down almost eight cents, the beans are down seven, and Chicago wheat is down more than 12 cents on the lead month. K-2 wonders if I know why. I wish I did.

The easy answer is that the USDA Crop Progress Report out Monday reinforced in traders' views the idea that the corn and bean crops will be records. The corn progress is still record early, and the bias is still that an early crop is a record crop.

USDA says that, as of Sunday night, 88 percent of the corn is in dough stage. Ohio is rated at 91 percent, up from 82 last week and way ahead of the 71 percent of last year. Crop reporters admit that there are a lot of holes in some fields, but they are confident the bushels are there. This week, it is hard to argue against that.

The thinking is then that we have good demand, but maybe not enough to support the current prices, so let's break them a little. Prices were supported by the stronger dollar, but that has gotten weaker.

December corn futures rallied to the spike that the wheat rally caused. That was 4.38-3/4 on August 5^th. We broke to 4.10 in six days, but rallied back to the high. Dec corn traded 4.37-1/2, 4.37-1/4, and 4.37-1/2 on Thursday, Friday, and Monday. Take a look at the chart—that makes a strong argument for a top after the break to 4.22 overnight.

Things are similar over in the bean pits, er, on the bean computers. This electronic trading has me wondering what the Board of Trade looks like these days. The beans had a 10.49 November futures high, then broke to 10.11-1/2. The bounce was right back to 10.48-1/2. Now we have traded lower three days to the overnight low of 9.96. Again, this looks like a top.

The December Chicago wheat futures came screaming off the 8.68 high of the 6^th to hit 6.77-1/2 on the 18th. We are now trading 7.14 again, with no idea of a return to the highs.

Make your arguments. What could happen this late in the season to give us new highs? Only a serious surprise in yields at harvest, which is just around the corner for some areas. What could give us sharply lower prices? Confirmation that the uneasy fears that have supported the market are unfounded.

That is the long version –my attempt to explain the break this morning. The short version is simpler.

When K-2 asked why we were lower, I said, "I don't know.

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

2010-08-17T09:52:00.001-04:00

Market Monitor

By Marlin Clark

Volatile markets seeking direction

Volatility, by definition, is a measure of price movement versus time. The more price moves in a given time, the more volatile.

We are currently seeing increasing volatility in all three major grains as market uncertainty and topping action is defined. Fundamentals are somewhat uncertain, leading to divergent opinions. The excitement of a historic wheat rally has faded as traders are deciding if the rally is over or merely taking a breather.

"Breather" would be an understatement of the December wheat futures contract, where prices broke over $1.80 a bushel in ten days. After the high of 8.68 in the overnight hours going into Friday the 6^th of Aug, we traded 6.87-1/2 on the 16^th. The bounce to the overnight of 7.06-1/2 going into Tuesday as this is written does not amount to much. We have been up and down several days reaching this price, and we are up a dime Monday night as we wait for the market to open this morning.

It was exciting while it lasted. If it returns it will be exciting again. As usual, prices went down faster than they went up, and the downward moves are the gut-wrenching ones. December Chicago wheat gained nearly $4.00 in two months, but lost almost half of that in ten days.

The corn and soybeans have become more volatile as they also made highs. They are both still trading near the highs, however. Corn futures were trading in two-week cycles, but near the top got into cycles of a week or less. The soybeans had a long, one-month cycle, then had two very quick one-week reations.

December corn futures had a low the end of June at 3.43-1/4. The high was made a little more than two weeks later, at 4.10 on July 15^th. Two weeks time got us back to 3.76 on the 27^th, but by the 8^th of August we were back to the contract high of 4.38-3/4. By the 11^th that was 4.05-3/4, down 33 cents, but we bounced back to 4.33 by Monday the 16^th. Overnight Monday/Tuesday we are at 4.23-3/4. The pattern of quicker cycles is evident in the last few weeks.

November soybean futures are different in that the long cycle to the top was very steady, more like the wheat charts. July 1^st showed us a low of 8.94, and the high of 10.49 took more than a month, to August 5^th. We broke prices 20 cents in a week, but rallied back to within a half-ent of the high on the 16^th, Monday. Currently the November contract is at 10.35.

It should not surprise you that traders are looking at the charts and trying to decide how to trade. It is too late in the summer to do major damage to corn. It is late for beans, although some surprises are possible in both. I am wary of the beans, where farmers tell me of crops that look great but have two beans in every pod. It is hard to count bean yields by walking fields and it is impossible to judge them from the road.

The wheat was early, and there is a lot of early corn and beans. The bean crop was stretched out by May rains so that harvest will start early, but be stretched out.

This may help corn by supporting basis, or the market may decide the crop is so big the length of harvest does not matter. This may be the year that the early corn is left in the field to dry for free. It will be tempting to run the combines long enough to tune them up and open up fields, then to not get in a hurry.

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

2010-08-10T09:29:00.001-04:00

Market Monitor

By Marlin Clark

Wild and wooly market hard to track

In the old cowboy song, "I'm wild and wooly and full of fleas, and hard to curry below the knees…" That pretty well describes the Chicago Board of Trade recently. The wheat rally which has driven this market stuttered overnight going into Friday, then staggered and collapsed Friday. The result was a $1.20 turnaround in a few hours, and less hair on the head of every trader following these markets.

September wheat futures were up as high as 60 cents in the overnight, the daily limit. When trading opened Friday morning they quickly went from up 30-something to down 35, then slid on down to minus 60 cents. Since then they have traded up and down a little, but as this is written before the morning open Tuesday we have September futures at 7.04-1/4, well off the 8.41 high of the Thursday-Friday night session.

So, the party appears to be over, or is it? Is this just the break to get new buyers in, or get the old to return? Was this just serious profit taking? All this remains to be seen, as the stomach turns.

The thinking on the way up was that the wheat was pulling along the corn and beans. Not so, if you watch what has happened since the wheat break. Corn and beans have held most of their gains, until a significant break overnight going into Tuesday. As this is written, the corn is off six cents, and November soybeans are down 12 cents.

Farmers who were smiling briefly over spotty rains ten days ago are back worrying about crops. There is still a long way to go to make the near-record crops traders have plugged into projections. Does that mean that this concern is already expressed in the supported prices that wheat dragged up? Do we stay near the top on weather concerns? Do we break as we trade the last production reports? Do we make new highs on hot and dry weather?

Some or all or none of these things will happen, and that is as definitive as I can get! It's like answering a question with, "yes, no, or maybe."

Looking at the prices, September corn futures had the big low of 3.33-1/4 the end of June. We had a July 15^th high of 3.97-3/4, then a July 26^th low of 3.61-3/4. Thursday the high was all the way up to 4.25, on a daily range that day of the 30-cent limit. We are now at 3.97.

November soybeans had the big low July 1^st, then climbed in steady increments to the Thursday high at 10.49, up 1.55. We have eased off 26 cents to 10.23.

September wheat had a June 10^th low of 4.43-1/2, and a high of 8.41 on Friday. Just that fast we are at 7.04-1/4.

The end of that cowboy song is, "I'm a she-wolf from Cripple Creek, and it's my night to howl!"

There will be a lot of howling before this summer's grain markets are done.

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

2010-08-03T10:41:00.001-04:00

Market Monitor

By Marlin Clark

Turn around Tuesday may bite us today

Turn around Tuesday may bite us in the behind today. Here a few minutes before the open of trading Tuesday I am looking at the charts and thinking we will at least take a pause in the market action that has given us new highs in corn, beans, and wheat.

I cannot escape my notice that the big gains during the day Monday that capped off a few days of frantic trading did not hold. By the close the prices were actually lower, and posted technical warning signs.

A couple of definitions would help here. When we look at the charts, we are doing "technical" analysis as opposed the the "fundamental" analysis of studying supply and demand. One focuses on the appearance of the charts, one focuses on whether the supply of grain or the perceived and anticipated supply is properly reflected in current and deferred prices.

Next, we frequently look for indicators that trends are changing. One is the "key reversal." In this, the high is higher than the high of the day before, and the low is lower than the low of the day before. This is a very strong signal of a top. Not so strong, but significant is the "outside day." In this, the High is higher than the day before, but the low is lower than the close of the day before.

Monday showed us an outside day in the September and December corn contracts. The December corn closed at 4.06-3/4 on Friday. Monday it traded a range of 4.03-1/2 to 4.18, and closed at 4.18. The lower low, higher high, and close below the previous close makes it an "outside day."

The November beans had a remarkable range, but managed a close above the previous day's close. The close Friday was 10.05. It traded Monday between 10.01-1/4 and 10.29-1/2. It closed at 10.10, though, above the previous close. Still, the move felt negative, and there seems to be follow-through on the Tuesday overnight trading. All the grains are lower going into the day session Tuesday.

As this is being written, the market has opened, and prices are not as bad as the overnight closes. However, December corn is down two cents at 4.02, November beans are down 3 at 10.07, and the September wheat is off 4 at 6.89.

This market has been following a weird combination of weather, supply of wheat, and outside markets. The combination has made it hard to make sense of any daily move. Wheat has dominated, with a move of $2.69 up since the end of June. That move has been steady and dramatic. This is the first break, and we are watching it closely.

There is an ebb and flow to the markets that seems to result in changes of direction frequently on Tuesday. That pattern is holding today, but we don't really know if the trend is changing until it has for a few days. That can be frustrating, but the successful futures traders don't follow the same rules as cash grain people. Futures traders follow the markets. Producers and users are always trying to anticipate.

The weakness overnight is accelerating as this is written. Corn is now down a nickel, beans down 11, wheat down 16 cents. We will be able to explain all this in some reasonable manner that may or may not be true when the day or the week is over.

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

2010-07-27T10:17:00.001-04:00

Market Monitor

By Marlin Clark

Looking for Mr. Goodbar Chart

The confusion that is price movement on the Chicago Board of Trade these days is only heightened by study of our modern brand of tea leaves or chicken entrails—the bar chart.

Yesterday I was looking at the September and December corn charts and thinking they looked like a head-and-shoulders top had formed. This is a very strong pattern that has a right and left "shoulder" and a head. It signals a very strong topping sign, and portends a strong move back down.

That was yesterday. Today, Turnaround Tuesday, I am looking at strong overnight markets that have prices up a nickel on corn and beans, a dime on wheat. So, what goes? Is this just a blip on the chart, or is the trend not established? Let's look back.

Wheat has been the strongest chart, and does not show a strong topping action. September Chicago wheat futures had a low clear back in early June at 4.42-1/2, then rose steadily to the July 22^nd high last week at 6.10. Quite a move! We are still trading 5.98 this Tuesday morning after a break Monday to 5.84-1/2.

September and December corn charts are very similar, so let's look at the December. There we put the low in on June 29^th at 3.43-1/4. Early the next day we were a quarter of a cent higher, then started a big rally. The high was actually two weeks ago, posting a 4.10 on July 15^th. Since then we broke to 3.76 on Monday, but have bounced seven cents off that overnight.

November soybeans are in a similar move, but with bigger swings. On July 1^st we had the low at 8.94, then rallied nearly a dollar to 9.92-3/4 by the 16^th. In the next ten days we lost a third of the gain, making a low Monday at 9.61. We bounced 11 cents off that this morning late in the overnight session.

The corn especially shows a head-and-top formation, but the overnight violates that. This makes the day trade Tuesday very important. Chatter off the Board this morning before the open is that the market is trading the expectation of a big crop against the strong demand for the old crop. The current demand is known, the big crop is not. That makes it easy for strong demand to drive the market in spurts for awhile.

The USDA Crop Condition Report has the maturity as measured by silking ahead of normal by 14 percent. This seems to continue to confirm the trend toward a big crop. The market continues to believe that an early crop is a record large crop.

The conditions around my world are improving, with some timely rains of more than two inches total in the last week after a week of hot weather and curled leaves. Current forecast expect rain over the Midwest this week, but hot and dry weather ten days ahead.

So, all that to say there is uncertainty in the markets, and that results in volatility. I have listened over the hot line this morning to one man looking for a corn rally back to 3.95 to 4.05 December futures. We are now 3.82-3/4, up almost five overnight and 15 minutes to the morning open. At the same time, another analyst from his same company just said he did not look for the rally to be strong or to hold. You pays your money and you takes your chance.

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

2010-07-21T09:19:00.001-04:00

Market Monitor

By Marlin Clark

Obstinate and opposite market

I am thinking this morning that the grain market is like a sixth grade boy this morning—obstinate and opposite. Whatever you suggest, he wants to do the other thing. The more you push, the more he pushes back. Too old to spank.

Think about it—we came out of reports that said we planted four percent more corn acres and four percent more bean acres and we made new highs. We started to dwell on tough growing conditions and locally poor stands, and we started back down.

Last Thursday we made a new high on December Chicago corn futures at 4.10. That was nearly 77 cents above the June 29^th low. The move was exciting, and short. It was also short-lived. Three ugly days have us back down to 3.88 on the Monday/Tuesday overnight. That is 22 cents off the high, and counting.

Similar action is seen on the November soybean chart. The low there was on July 1^st, at 8.94. We gained most of a buck, to 9.92-3/4 on Friday the 16^th. This Tuesday morning we traded as low as 9.66-3/4 again, 26 cents off the low in a day session and a night session.

Haven't had enough to make your Wheaties taste dry? Look at September wheat futures on the Chicago Board of Trade. The low was made clear back on June 9^th at 4.42-1/2. We rallied an incredible $1.56 to the Friday high at 5.98-1/2. Monday and Monday night we lost 24 cents off that.

At the same time the markets are going down, the chatter coming out of Chicago is that the crops are at risk to high temperatures and lack of rain. Also, the stands are not that great to start with.

So, it seems prices are not following what we are observing, but are going the other way. Trying to rationalize that is difficult, but I will take a shot.

Timing is everything. What we conclude may be already in the market, or the market may be late reacting. As producers were looking at the increased acres in the USDA reports, traders were looking at surprisingly reduced grain stocks in the same reports. While producers were worrying about corn curled up in the fields, traders were saying it was too late to worry about a big drought.

At the same time, the outside markets were turning against grains. After a long period of the dollar gaining on the Euro, the Euro fought back this week. It is gaining again, either as a rebound, or as a change in mood. This hurts exports.

So, decisions are hard to make. I think the market returns to worrying that the record yields predicated on record early planting are suspect. Here in Wayne TWP we have had rain forecast nearly every day, and continue to have it forecast for five more days. So far that has resulted in the tease of three ten-minute gentle showers in two days. The only thing growing in my lawn is the plantain.

No farmer is going to sell corn until it actually rains a lot.

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

2010-07-13T10:05:00.001-04:00

Market Monitor

By Marlin Clark

Yo-Yo market comes back

Somewhere is the dresser drawer is still the Duncan yo-yo I used to play with. Not when I was a kid, mind you. That disappeared somewhere in one of my mother's housekeeping. This one was given to me one Christmas a few years ago by my kids. I immediately showed them how to go "over the falls" and around the world.

The joy of making a yo-yo do what you want is that you decide what you want. The last few weeks we have had a yo-yo market and we have had no control over it. Market analysts sit and ponder reasons for the recent moves after the fact. After the fact we can always make sense. Predicting the future is a different story. We don't want readers and customers to see the ugly side of the business—the tea leaves and the chicken entrails.

Stirring through the entrails this morning we see the excitement of new highs in corn, or highs confirming the May high, depending upon how you look at it. And, we see two days of easier markets as we decide if this is a bullish market or just a correction to an untimely downturn caused by actual fundamental information instead of tea leaves.

The fundamental information came in the form of the USDA Planted Acreage Report and the Grain Stocks Report. We also had world-wide stocks and other things going on, like the export inspections reports.

Aligning the reports with the results in the markets is harder than just reading them. Looking at the prices is the beginning point.

September corn futures made a high back in the middle of May at 3.91. Since then prices have been consistently lower, hitting a low of 3.32-3/4 on June 29^th and confirming that low on the open of June 30^th, at a half-penny higher. Then, prices got interesting as corn reacted to USDA reports by finishing nearly 30 cents higher, at 3.63-1/4. Follow-through the next few days led to a triple top. We hit 3.86-1/2 both on July 8^th and July 9^th, with a 3.86 even on July 12^th, Monday after the weekend. That high broke down Monday, with a 3.79-3/4 close, and we are more than a nickel lower at one point overnight. Currently, before the open Tuesday we have 3.77-1/4.

USDA now tells us that corn acres are up two percent over last year, to 87.9 million acres. 250,000 of those increased acres are in Ohio. They also say corn stocks are up 1 percent. So, where in the tea leaves can we see a reason for a return to the highs in corn?

The reason has to lie in fear that the crop size is overestimated. We started the year locked into the idea that our record fast corn pace, which slowed in Ohio in the middle of May, would guarantee a record crop. Right now the traders seem to be letting corn follow soybean gains, and to be worrying about the current condition of corn and coming weather.

Depending where you look, the corn looks rough. Holes, yellow spots, up and down fields are prominent. Then again, you can talk to farmers in NW Pa who say a little rain now would give them record crops. It is hard to get a consensus. What we do have is a ten-day period forecast to be hot and dry, and that may define things for awhile.

USDA says the bean plantings were also up two percent. If you are wondering how this is possible, the wheat acres are down eight percent, to 78.9 million acres. That is the lowest since 1971, while the soybean acres is a record. USDA also had the bean stocks down four percent.

The beans have been in tight supply to the processors, and the drop in perceived supply contributed to a big price move, regardless of acres. November futures gained almost 67 cents, to a Monday high of 9.60-3/4. We were 14 cents off that last night.

The big mover has been wheat, where reduced acres and poor quality pushed prices up most of a buck. The June 30^th low of 4.56-1/2 became the July 8^th high of 5.49-1/2. We are now 18 cents below that.

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

2010-06-29T10:04:00.001-04:00

2010-06-29T10:03:00.001-04:00

2010-06-22T10:44:00.001-04:00

Market Monitor

By Marlin Clark

Lack of insight, but not opinion

I was reminded this morning that when it comes to really knowing what is going on in the grain markets, I am as useless as certain vestigial mammary organs on a male swine. Maybe you have to think about that for a moment. I cleaned it up a little for the "General" audience. In fact, at various times in my life certain companions have suggested that I am a male swine, but that is another story.

Perhaps I thought this as I studied charts getting ready to write this, and noticed that I was long a little corn and short a little beans at just the time that corn was going down and beans were going up. Surely, if I knew what I were talking about, I would just sit here and play the market and get rich and work for myself.

In fact, I tend to be one of the most disciplined cash traders I know. I try to stay even the market, not betting on price movement but on my judgment of basis improvement. My judgment fails me now and then, but my price guessing is nearly flawlessly wrong. Put money on the table, and my nerves sue for peace. Peace to me is staying even.

My new quote system includes a voice service that has people in Chicago breaking in whenever they please to tell me what they know about what is going on in the markets. I am starting to think that they have to do this on some schedule whether they really know anything or not. I only have to do that once a week, and I don't interrupt Laura Ingraham and Bill Bennett to do it. That is what is playing on my computer until the experts break in.

It is a hard life being an expert. You have to have an opinion for why the market is doing what it is doing, a prediction for what it is going to do, and an explanation for why your previous opinion is not working out right now. Occasionally you get to brag about being right.

When reasoning about the grain markets is not working, you blame it on outside markets. This is what I have been doing for a month, while Greece, and then Spain, and then Portugal have been melting down their economic reputations. This has hurt the euro, helped the dollar, hurt exports, and given us all a reason for grain prices to go down when we thought they should not.

Now, just when I am tired of that argument, and tired that it is correct, things change. It is bad enough that our own economy is crummy. We get tired of having grain prices be at the mercy of every whim of every country. Why does this thing about being a world economy seem to impact on agriculture the most? Where is Earl Butts when you really need him? (He preached that we should plant fencerow to fencerow because we could not keep up with worldwide demand. Then we did, and found out that the world was hungry, but the hungry did not have money to buy our grain, which there was now too much of. Then came the 80's, when we traded in the Earl Butts farmers for younger, smarter ones who bought our equipment at penny auctions. Maybe that was just me…)

So , this week we traded grain on grain fundamentals for a change. At least that is what we said when the week was over. Soybeans were higher, and they should have been. There is some idea that all the acres are never going to be planted, and USDA tells us that the exports are for the year 21 percent ahead of last year and 7 percent ahead of projections for this year. The Delta beans are starting to burn up.

Corn gained over 30 cents before an eight-cent fall back Monday. Maybe this was a backlash to talking about Europe too long. Maybe it was just too much rain. You know there is too much rain when analysts keep saying, "It is not like 1993!" Well, I hope nothing is ever again like '93, when the Big Muddy got ten miles wide here and there. It is wet enough to hurt the crop, though, and severe storms are supposed to be widespread this week.

Wheat futures have perked up for ten days, which is by definition a contra-seasonal rally. It is harvest, and harvest is slowed by rain. Test weights are going down on the hard crop. The soft crop is getting ready for harvest, and we are starting to worry about that quality. Wheat was invented by God for dry regions, and Ohio is not one of them.

Maybe trading outside markets was more fun.

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

2010-06-15T09:57:00.001-04:00

Market Monitor

By Marlin Clark

Dead cat shows signs of life

Last week I mentioned the old saw about the dead cat—that even a dead cat can bounce a little. That was in response to the idea that the market had gone so low, a little bounce did not mean anything.

The bounce has now lasted for a week, and I am forced to admit that there might be a little life in the old bag of fur. A look at the charts shows good gains in the spring grains, and the slowed wheat harvest is contributing to a bottom finally being found on the wheat charts.

Rain in the Plains has stopped the hard wheat harvest, and bought with it talk of declining test weight levels. This is particularly critical because elevators carried a lot of low TW wheat in from last year, looking to blend it out. The Chicago wheat has not been as volatile as the hard wheat markets, since harvest is still a couple of weeks away, even in this early year. Still, the July contract finally but in a bottom after a month of mostly lower prices. The low was on June 9^th, at 4.25-1/2. The bounce had us to 4.54-3/4 for a moment on Monday. (4.54—a nice point of reference for all you big-block Chevy fans, even if GM wants everyone to say "Chevrolet" now.)

The rains in the Midwest have stopped soybean planting, which is of some concern. The crop is at 91 percent planted, which is just above the normal 90. However, little progress is being made, and it is getting late.

The soybeans have worse problems than late planting. The outside markets we have been looking at are limiting exports. Again this week we failed to move offshore what we needed to meet the USDA calculations of demand. This time it was 7.4 million bushels instead of the 9.9 mb pace we need for the rest of the marketing year. The crush has also been disappointing.

Still, beans managed to jump 16 cents at one point Monday, and corn was up a nickel at one point. The what was up almost 11 cents. In this case the fundamentals did not overcome the easing of outside market issues. The dollar was down, crude was up, and the Dow traded both sides before going down 20 points.

For Monday, this overcame the fact that corn exports are also lagging. It also overcame the fact that the market anticipated improved crop conditions in the Monday afternoon report. The market was wrong, as USDA says the crop is not as good this week as last. That may come to play in the Tuesday market, although we were down fractionally in the overnight trading. The move up may have been a knee-jerk reaction to the official confirmation of the rumor of a sale to China last week. 120,000 metric tons is not a huge sale, but it is to China, where the rumor mill gets the most bang for its buck.

For the week, corn gained a 19-1/2-cent bounce off the low, July beans had a nearly 33-cent bounce to the Monday high, and wheat bounced nearly 30 cents to the Monday high. Let's see if we can keep the bounce going!

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

2010-06-08T10:02:00.001-04:00

Market Monitor

By Marlin Clark

Leaden market shows no bounce

Every so often in a really sick grain market we get a small bounce, and try to explain it. The common attempt is that it was a "dead cat bounce." The joke is supposed to be, if there is any humor in a dead cat, that even a dead cat can bounce a little.

The joke this week seems to be that we can't even come up with a dead cat to bounce. This market seems to be more like a fishing line sinker. It acts like a hunk of lead that just keeps finding another crack to roll into to get just a little lower and lodge there. The market tries to pull up the sinker, but it is snagged on a sunken log.

Grains on the Chicago Board of Trade are barely showing signs of life, as they move in small ranges on small trading at the bottom of long-term charts. Take July corn, where we were now as low as 3.35 on Monday night trading. That is barely above the 3.33-3/4 contract low and harvest low made clear back on September 6^th. Some of the first trading of the year had us almost to 4.43, a dollar and ten cents higher. Now we are back there to the low again.

If you are looking for any good in this market, it is that we at least have not broken the contract low. If we slide a little more, we will be hunting for support in new territory. Be warned that explorers end up in the cooking pots of the locals they are exploring. In other words, the market could have us for lunch. Not a pleasant thought, especially after what we have been through. Reminds me of the best line from one Indiana Jones movie. Turning down a particularly revolting food, the heroine says, "it's just that I had monkey brains for lunch!"

July soybean futures are almost as bad. There, we have had bounces in the last two weeks, but no real gains. The market goes up one day, opens at the high the second, and crashes again. July Chicago futures for soybeans had a 30-cent range Friday and Monday, and finished at the bottom of the range. Briefly Friday we saw 9.58-1/4, but traded 9.28-1/4 once Monday. We are overnight going into Tuesday at 9.35-3/4.

Compare those prices to 10.20 on April 26^th and 10.92 the first of December. The harvest low was 8.91. The good news is that we are not at the bottom, like in corn, just headed that way. The bad news is, there is plenty of room on the charts to go lower.

That cannot be said for wheat, where we are charting new territory every day. We make a new contract low every day we trade recently, and there is no stopping this until one day we look around and see the slide has stopped. With harvest getting close in the soft wheat states, it is hard to believe the slide stops now. Maybe we get a surprise at harvest? The surprise for the hard wheat farmers has been basis of 1.50 under. As bad as the Board is, the basis makes it worse.

We made the low ofr 4.31-1/4 Monday, nearly 86 cents off the May high at 5.17. The November high of 6.23-1/4 represents more than two dollars.

For the past several weeks we have been saying that markets were being pushed lower by outside markets. The Euro has made a four-year low against the dollar. This makes exports more expensive, and smaller. The Euro is in trouble because of economic and debt problems by member countries of the European Economic Community.

Interestingly, the chatter off the Board of Trade this week varied. On some days the comments were that we were trading grain fundamentals. On others, that we were trading the outsides. The scare there is that, even when we ignored Europe, we struggled to make gains.

The market currently believes we are making huge crops, and with widespread rain soaking us down, it is hard to argue with that.

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

2010-06-01T09:20:00.001-04:00

Market Monitor

By Marlin Clark

Rain starts to make grain

I lay awake in the middle of the night for a long time listening to the rain. I am not sure why I do that. It should be a soothing sound to put me to sleep. Maybe I am listening for wind, with a vestigial memory of the night the elevator blew off the corn crib. Maybe I am remembering the storm that gave us seven inches in half an hour and cut Knapp Road in eleven places in the three miles between home and the farm.

Perhaps I am the victim of life in Ashtabula County, where the blessing of rain has often been overdone. Rain brings life and rain brings mudholes. Only those of us who eventually gave up and finally planted buckwheat the first week of July will understand that.

Monday and Monday night we had two inches of rain in most parts of the North Coast. Five miles of I-80 in Trumbull County had three inches while I was driving on it Monday night. At 20 miles an hour. With my flashers on. With Squeeze begging me to pull over. The rain most places was just what the grain doctor ordered, although I suspect there is still an occasional bean field here and there that is unplanted. Those who started planting very early finished up this week after a two-week break of wet weather . Those who said it was too early to plant in the middle of April were struggling to finish the last week of May.

For those of us who have converted to suburbanite living in the country, the rain meant the worst thatch of the decade was finally pushed into my lawn. I mow six acres, partly because it makes the house look like a country estate, and partly because I gave up a thousand acres and I haven't quite adjusted. The only reason I have a five-foot mower is because I haven't scraped up the money for a six-footer, and if I had the money I would build a pond instead.

The rain soaked in with no puddles and only some damage to the peonies from five minutes of hail. A walk with Jack the Wonder Westie and the Lumbering Lab early this morning revealed a beautiful day and the realization that I have never mowed my 100-meter rifle range and it is now waist high.

And, I am reminded that "rain makes grain." It is one of the strongest axioms of the grain trade, and it will hurt the chance of price recovery from the bearish market we are experiencing. Grain prices continue to decline on the Chicago Board of Trade. The corn and soybeans are now near the February lows, while the July wheat futures made a new contract low of 4.48-3/4 this morning on the overnight electronic trading.

The wheat low continues the down trend line which has a low at 4.83-3/4 in October, a low of 4.60-1/2 in early April, and the low this morning. Major news is needed to stop this train wreck, and what we have instead is perfect weather for wheat.

All grains are continuing to be hurt primarily by European economic and political news. This is an old story, but continues as the dominant one. This week focus was on another country, Spain this time, with critical debt issues pushing toward insolvency. The result was more erosion of the value of the Euro versus the US dollar. This is a mixed blessing that gives us cheaper fuel, but also cheaper grain. Crude was down $20 in the last week, but corn was down 28 cents in the last month. I don't want to see corn be the same price as gasoline, no matter how cheap that makes it to get to the grandkids.

July corn futures had a low of 3.51-1/2 the end of April, bounced in two weeks to 3.85, but hit 3.53 early Monday morning. July soybeans spent three months, in three stages gaining a dollar from 9.20 on February 4^th to 10.20 on April 26^th. This Monday morning they were back to 9.30-1/2 and still skidding.

Good crops at cheap prices are better than poor crops at good prices, so enjoy the rain. I am ambivalent about the dollar value. As a good American, I want it strong. As a retired farmer, I care more about good prices and profitable farmers feeding the world.

Oh, and don't call me after 2:15 this afternoon for awhile. The market will close, and I will be replacing the sleep stolen by the rain last night with a power nap in my chair. When the phone rings I snap my neck, and that gives me something else to complain about.

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

2010-05-25T10:18:00.001-04:00

Market Monitor

By Marlin Clark

Tales from the tractor seat

Back in the dark ages, in the early 70's, the government in its wisdom decided to make Memorial Day come as a Monday, regardless of the calendar, in order to make a three-day weekend for the working class. The first year it came early, and we were still trying to plant on Friday as the holiday was starting.

I had made a 40-foot spray rig that mounted onto my 930 Case Comfort King. It had front and rear tanks, and the outer booms were removable so the same rig could be used for spraying while planting.

I finished spraying a field on U.S. Rt. 6 in Cherry Valley and parked the tractor at the driveway with the booms still out. We were moving to another farm ten miles away, and I was in a hurry. The plan was to get a ride back to the tractor with a neighbor who was helping me until his pager called him to his trucking job. Then, I forgot about it.

I remembered it at 4:30 the next morning when Dad called me. The neighbor across the road from where the tractor had been could hear it running in the field, in the dark. I threw on clothes, rushed to the farm, and saw what was left of it come to a stop against a power pole.

Sometime in the night a vandal shorted the hot battery lead to the solenoid wire and started it. He put it in fifth gear, which was over ten MPH with balloon tires, pulled the throttle down, and jumped off. The next hour or so, as near as we could reconstruct, must have been amazing.

There were two-foot deep ditches on both sides of the road. The telephone cable was on the south side, the power poles on the north. The tractor jumped the ditch into the neighbor's field and started making circles. The wheels jammed to the left, so each circle took it across both ditches to the north, then back across both ditches to the south. Each time it crossed a ditch it did a wheeley, hit the rear tank frame, and slammed back down.

On one pass it broke off a telephone pole. On a subsequent pass it snagged the phone cable on the boom and carried it back across the road. There it wrapped it around a power pole. Eventually there were50 wraps of cable around the pole, representing 25 trips with the cable. The wraps worked to the bottom, so eventually strain pulled the pole from the ground. It fell on the steering column. The hand throttle was bent past the detent that shut the fuel off, so the tractor stopped.

The tractor was a mess. At one point the radiator was holed, and the resultant overheating cracked head. Every piece of sheet metal was mashed. The steering column and seat were broken off. The spray boom was twisted. And, the tractor had kept running until the fuel was shut off. In the process, seven telephone poles were broken from the strain, and a quarter mile of power line was replaced.

There was good news and funny news, if you twisted your mouth just right. On a U.S. highway in the middle of the night, no one came along for all this time to run into the telephone cable. And, a half mile down the road, Terry Mills was awakened by a strange ringing of his phone. In the days when they were hard wired, his had been pulled off his table, up the wall, and was trying to leave the house through the wire hold in the wall near the ceiling!

I rebuilt the tractor over the next winter, and it went on to log over 8000 hours before I sold it. Memorial day is still on Monday, and I still remember, not the troops, but my tractor.

Oh yeah, for those of you who thought you would be reading about grain prices, I will tell you what I told a farmer this morning—I don't know what is going to happen to prices. Overnight we are down a nickel on corn and a dime or more on beans. The beans are now back to the February lows, after being nearly a buck higher. The corn had rallied, but is now in the middle of the recent range, at 3.65 July futures.

The outside markets continue to dominate, making actual grain news irrelevant. The Dow was down 126 yesterday, the European financial mess continues, and our resultant rising dollar is hurting soybean exports. We now question if we will make the USDA export projections for the year.

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

2010-05-18T10:08:00.001-04:00

Market Monitor

By Marlin Clark

Report bounce goes away

When USDA released their monthly Crop Production and Supply and Demand Reports Tuesday May 11^th, the market saw glimmers of hope amongst the nuggets of news. The shiny spots now appear to be fools gold.

Markets spurted higher coming out of reports last Tuesday, but reality struck later in the week and we are now looking at a new recent low in soybean markets and a return to the low in the corn. Soybean prices bounced 35 cents and the corn jumped almost 15, and then it was over and prices were lower than ever.

Look at the charts. July soybean futures on the CBoT had a low at 9.39-1/4 the end of March. They rallied over 80 cents to the 10.20 high of April 26^th. Then, they lost 82-1/2 cents by Monday. In the middle of that was the short-lived 35-cent jump in the two days after the reports. We are now back to the prices of middle March.

In similar fashion, July corn futures had a 3.51 April 27^th low, bounced to 3.85 on May 12^th, then dropped to 3.55-1/2 by the 17^th, Monday. That recent 3.51-1/2 low needs to hold, or we could hunt for the old low of 3.33-3/4 put in on September 8^th, the harvest low.

Report reactions are always difficult to predict. Maybe there is good news, but maybe it is not good enough. Maybe it is "already in the market." That is the usual saw we quote when prices don't react according to the news we see.

In this case, it may simply be that the news was not good enough to overcome "outside markets," the other phrase we shove in there to explain what may be beyond reason.

This week, the outside markets were notable. Biggest news world-wide was the bailout by the International Monetary Fund, which mostly means by money borrowed by the US and funneled through the IMF, of Greece. That country was facing riots brought about directly by austerity measures pressed by the government on the people. Indirectly they were a result of overwhelming debt that is crushing the economy.

Since Greece is part of the EUC, and uses the EURO for currency, the problems end up weakening the EURO, especially since all the news talk has focused interest on several other countries with high debt loads. Now, all of a sudden, the world currency to be respected is the US dollar. After several years of China and oil-rich countries in the Persian Gulf pushing to use the EURO to replace the dollar as the trading standard, that idea does not look so great. The European economy is no better than the US economy. The dollar looks pretty good again.

Of course, if your business depends upon a large part of your crops being exported to other countries, a stronger dollar is not good in the short run. Soybeans are now more expensive this week in Rotterdam, expressed in EUROs, than they were last week. That is to say, they are now worth less expressed in dollars here.

And, less we feel smug about our dollar looking good again, look at the foreign debt in perspective. They now have debt equal to 1.25 times their gross national product. We are approaching debt equal to the GNP, and projects of the course we are now on is that we could also hit the 1.25 mark in five years. Then, the strong dollar will not be a consideration, or will it be our biggest problem.

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

2010-05-04T09:28:00.001-04:00

Market Monitor

By Marlin Clark

Fast planting weather, slow market

Since this is the first week of May, it should not surprise any market watchers that weather dominates trading views of the grain markets. It has always been this way, and always will.

What has changed is the view of the weather. A month ago the market was talking about wet weather that would potentially slow the start of planting. Traders built a little delayed-planting premium into prices. The weather changed dramatically, and so did the markets. Large volatility has characterized recent prices as traders reversed themselves on the weather and now are focused on a record pace of planting.

Monday after the close of trading USDA released the weekly Crop Progress Report. It was no surprise that fast planting continues, although we did not expect that this time last week. At that time we had four or five days of rain forecast for the region. In fact, the rains were light and spotty. Some field that were worked in Northern Ohio looked a little juicy, but they were worked. In other places the dust flew.

As we drove into Jamestown, PA last night my wife watched a planter turning in a cloud of dust and asked who was farming there. I told her who had been working that ground, but that I couldn't tell if it was them because there was too much dust!

Dust, in Northeast Ohio, in early May. Since farmers, and psychologically I am one, can always find the dark lining in the cloud, we can now start worrying about a hot, dry year! Coffee shop talk would be that this is starting out like 1988, except that it is faster than 1988, and the coffee shops don't have any farmers in them right now. The coffee is coming out of thermoses tucked in the corner of the cab or carried to the field for tallgate suppers.

How fast are we? USDA reported Monday afternoon that the US was 68 percent planted, breaking the 2004 record for the week of 63 percent. The market that year was not thinking of drought, but of early planting promoting record yields. That did happen, with over 160 bpa for the country. Ohio is at 64 percent, planted as of Sunday night, which means we gained 19 points in a week and the US gained 18 percent. Last year Ohio was only 12 percent and the nation was 32 at this time. The average for Ohio this week is 35, with the US normally at 40.

So, markets are defensive, with corn down over a nickel at one point Monday, finishing down almost three cents. Overnight we are down another 2-1/2, and there is no other reason. The fear of a another record crop will undercut the corn until something fundamental changes.

And, of course, record corn planting pace results in fast planting of the soybeans. This is the first week for USDA to report bean planting, and the numbers are impressive. The US is 15 percent done, compared with five percent last year and an average of eight percent. Ohio is ahead of that, with the beans 23 percent planted. Last year this time we had only just started, at three percent. The five-year average is 12 percent. I am having a geezer moment, remembering when we planted corn anytime we felt like it, mostly in the last half of May. We thought early June was fine for beans. We thought the frosts would kill the beans, but now we plant beans before corn sometimes and expect them to shake off the frost and thrive.

I also remember those tailgate parties in the field, with big pots of soup and chili and sandwiches and slabs of pie and three little kids running around, excited to see Daddy. I got to see one of them work college summers on a big farm, and that memory is bittersweet. "if you had kept farming," he told me, " I am the one who would have farmed with you."

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

2010-04-27T09:06:00.001-04:00

Market Monitor

By Marlin Clark

Fundamentals jerk markets around

Actual news instead of feelings and rumors is the influence on grain prices right now, and the effects are mixed.

Soybeans are using strong exports until recently to continue an uptrend in place since early February. Meanwhile, corn is weak on slow exports and fast planting.

It was no surprise to me that USDA reported fast corn planting Monday afternoon after the market close of trading. Friday night we drove to Findlay across 224 and the dust was flying everywhere. By the time we came home across the turnpike Sunday every furrow and depression was full of water, but a lot of acres were done.

So, Ohio corn planting coming in at 45 percent was expected, even though it was up from just six percent last week, and four percent last year at this time. Nineteen percent is the average. The trade expected 45 percent for the U.S., and had faded prices in anticipation. What they got was a whopping 50 percent for the country as a whole. That is up from 19 percent last week, and way ahead of the 22 percent five-year average.

Judging by the standing water, Ohio will not gain much this week, but we are still off to a start that makes for cheaper prices. We are switching our marketing to the July futures this week, so let's get started looking at them. The July corn had a low on April 1^st of 3.55. We rallied nearly 20 cents to 3.74-3/4 on the 16^th, but have now gone back to 3.56-1/4 on the Monday/Tuesday overnight session as this is being written. That was a quick pop, and all we are likely to get until the spring weather changes the mood of the market. All talk of a delayed spring is now gone, at least until we get two weeks of rain! The overnight trading confirms a little negativity from the planting report, with July corn futures down three cents to 3.56-1/2

The soybeans, meanwhile, have just had a one-day breather Monday in what has otherwise been a very positive market. The uptrend is firmly in place, although the market struggled Monday with the news that the export pace had slowed. USDA reported 8 million bushels of bean exports, and the needed pace is 8.4 million if we are to reach the projection of 1.445 billion bushels for the marketing year. Still, we are 16 percent above the needed export pace.

So, beans made a new recent high Monday, then closed 11 cents lower. Overnight we are down another 6 cents. That means we are now 17-1/2 cents below the Monday high on the July contract of 10.20, but the chart still is lovely compared to the corn.

The uptrend line for July soybeans is defined by the lows of 9.20 on February 4^th, 9.30 on March 15^th, and 9.39-1/4 on March 31^st. The 10.20 high means there has been a lot of volatility as we have gone higher. With the fast planting now slowed by rain, we are delaying any negative effect on the market of a fast planting pace for the soybeans. USDA is not yet reporting bean planting because it is historically early for that, but it should be noted that significant Ohio beans must be in. The current trend is for the well-equipped farmers to start them in April right along with corn. I have customers telling me they are more than started with the beans.

Chicago wheat futures had some noticeable excitement Monday, with a 31-1/4 cent range on one contract in five minutes. This is an example of a thinly traded market. We tested resistance near $5.00 on the May futures, then a sell order for 4000 contracts (20 million bushels) collapsed the market. May futures finished at 4.76, down 17-1/4 cents. The July is trading overnight at 4.87-3/4, down a quarter.

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

2010-04-20T09:59:00.001-04:00

Market Monitor

By Marlin Clark

Goldman sucks air out of market

I gave a big "ho-hum" when I heard last week that Goldman Sachs, the big investment bank, was being charged by Uncle Sugar of fraud. I hadn't thought the ramifications through.

Grain prices have broken sharply lower the last few days, and the reason given is the effect of the Goldman Sachs charges on the market. It is alleged that Goldman Sucks, as one commentator is now calling the company, offered billions of dollars of financial instruments based on bundled bank loans that were shaky. The fraud would be if they knew they were shaky.

"What effect does this have on grain?" is the common view, but these things are all wrapped together when you start thinking about them. I am struggling to understand some of the connections. I know some financial instruments are traded on the Chicago Board of Trade, with the Board being the regulator. There is talk that the government needs to take more control of financial trading regulations, so this could lead to negative feelings in Chicago which bleed over into the grain pits.

Then there is the fact that losses by investors in one camp can draw money out of their speculations in Chicago. Then, the Goldman problem contributed to lower stock prices at the same time that crude oil was slipping lower. These days there is a direct link between crude and corn because a major use of corn is to make ethanol. Ethanol prices are dominated by the value of the gasoline it is blended into, and that is based on the value of crude.

So, the banking problems of the last two years are a drain on your pocketbook that just keeps giving. If you are not subsidizing bailouts with your taxes, you are suffering losses in your grain prices. Who knew?

Corn prices were firming up on the Board through last week. We gained 5-1/2 cents in the may contract on Wednesday and 5-1/4 on Thursday. We held on to the gains with a fractional gain Friday. It was over the weekend that the Goldman talk began to dominate. The overnight session going into Monday was down nearly 6 cents, and it got worse from the day session open. We ended up down over 16 cents, to below 3.48 May futures. Even the overnight three-cent bounce does not take the bite out of that drop.

Maybe bad timing added to the losses. The market was focused Monday on the apparent fast pace of corn planting. Traders were guessing that 19 percent of the crop had been planted. After the close the report came in at exactly 19 percent, an accuracy that is interesting. The market has been giving a little support to corn on the thought that we had been wet and might have a delayed planting season. That has all gone out of the market now, and we will stay defensive until the weather changes.

The soybeans have fought off the negativity in the corn markets with fundamental news that is supporting prices. Brazil has taken off 89 percent of its crop, but the farmers there are holding off the selling. They normally rush to market to beat the high cost of storing against rising inflation. This year they are lagging, and that is helping our exports remain on record pace, above USDA projections. IN the process, May soybean futures made a new recent high on Friday at 9.89-3/4, above the February 23^rd high of 9.85, and the highest price since January.

Wheat futures had also been rallying for two weeks, but the last two days have been ugly, as in corn. The May contract lost 24 cents from the Friday high to the Monday low, and is now trading at 4.7475.

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

2010-04-13T10:24:00.001-04:00

Market Monitor

By Marlin Clark

Weather volatile, market stagnant

Here on our corner of the North Coast we always say, if you don't like the weather, stick around a few minutes. I remembered this as I was mowing lawn and tilling my garden last night. I have never done this in early April. I have frequently not done this until May. Yet, it snowed off and on for several hours Saturday!

Farmers have planted oats in the last few days, and one Hiram farmer has planted corn. His neighbor dropped a dime on him, and I won't mention Jack's full name in case he ends up replanting and gets embarrassed! Still, there is this feeling of a really early spring, and the thought that Jack is right.

I had a maple tree in emerging from bud two weeks ago. The Northern Spy beside my desk window is leafing out. Usually this happens the first week of May, sometimes later. The grape growers are freaking out that we will get a big freeze now that they have grapes emerging from winter too early.

All this and USDA has marked spring with a Planting Intentions Report that is frankly confusing. In the nearly two weeks since its release we have seen corn prices decline and soybean prices make small gains.

Part of the confusion in the corn is that there was no surprise. USDA says we will plant 88.8 million acres of corn, which is up three percent from last year. That could be thought to be negative to prices, but it was already in the market. The traders expected the increase, supposedly. Much of the increase comes from what we have been talking about, which is the wheat that did not get planted. The wheat acres are going to corn in a big way in states like Illinois, Kansas, Missouri and Ohio.

Soybean acres will gain less than one percent to 78.1 million acres. But, add that to the corn and we have the highest acres on record for spring planting. So, maybe those numbers are scary even if we were expecting them.

Aside from the wheat acres moving to corn, the market has focused on the wet spring. As I was discussing this with a farmer yesterday, maybe this factor got too much attention early. Maybe the biggest reason for weak corn prices is not the acres we expected, but the better weather we did not. All of a sudden tractors are running everywhere and delayed planting is off the Board thinking right now.

So, if we are getting a good start to spring and we are planting almost 89 million acres, maybe the market is right. Ahead of the report I feared that if the market did not digest the numbers well, we did not yet know what really cheap corn was. After the report we made a new recent low, dropping nearly eight cents after the report, to 3.43-1/4 May futures. That is bad, but it is not a free-fall. We have traded near that low six days now, but with an interesting two-day excursion into market madness. That would be last Wednesday and Thursday when we gained a dime the first day, then gave back eight and a quarter cents the next day. This is the kind of confusion thrill I could do without.

So, corn is bouncing on the low, but the soybeans still have an uptrend in place. The uptrend is measured by charting the cycle lows. We had 9.11 May soybean futures on February 4^th, then 921-3/4 on march 15^th, and finally 9.30-1/2 on March 31^st, after the report. We are now trading at 9.58. The small increase in soybean numbers may have surprised a market that thought the wheat acres would more evenly be split in the corn and beans instead of mostly going to corn.

So much for thinking the high corn production costs would favor beans.

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

2010-03-23T10:25:00.001-04:00

Market Monitor

By Marlin Clark

Market stagnant on lack of news

I can only talk about March 31^st USDA Planting Intentions Report so many times. It will soon be old news, but it is still the market mover right now, which is to say that the market is not moving. Corn futures are trading sideways in a lack of news, while soybeans show signs of life.

May Chicago corn futures bounced 15 cents off a low near the old contract low this month, but have trades sideways the last few days. The May contract hit a low of 3.61-1/2 on March 11^th, just missing the 3.59 contract low of early February. A quick bounce got us to three days at almost the same number fractionally above 3.76. We lost some of that Monday, and the overnight before the open Tuesday has us back to 3.70-3/4.

The twin issues of acres and spring weather will make the market for a month or two. As I said last week, we have to be afraid of more corn acres because of cheaper fertilizer (but higher seed) and because of extra acres available because all the wheat did not get planted.

Now, the market gurus still want to talk about wet weather delaying planting. This seems so wrong here where we have a month to go before we get serious about planting, but it may be a legitimate concern. The areas of the Corn Belt farther south are not that far from planting on their calendar, and it is wet. Heavy rains across the region added to the problem this weekend.

Still, at this point the rain is filling up the soil, not delaying things. This is a sign that the market is lacking in news.

To fill the gap, writers are ginning up more ethanol news. DTN had two interesting stories this morning. They ares legitimate, but a little ways off. We are seeing serious consideration by the government to allow E15 at the pumps. Hindering the move to gasoline with 15 percent ethanol is the labeling problem of distinguishing it from #10. Also, retailers are worried about liability if some cars will not run on E15. The good news is, the big goal of the ethanol industry was to produce enough that all gas would be E10. Now we are looking beyond that goal.

Add to this the TN story about E85. GM has produced 4 million of the 7.5 million vehicles we have that will run on E85. So far the limited number of pumps keeps 90 percent of the vehicles running normal unleaded. GM is wondering if they should continue to produce them.

Moving to soybeans we see that they actually have an uptrend in place, both long-term and short. The May soybean chart shows us a low at 8.87-3/4 in early October, a low of 9.11 in early February, and an Ides of March low of 9.21-3/4. Connect the dots and you have a strong long-term uptrend line.

The trend recently is also up, with a bounce of over 53 cents after that March 15^th low, then a four-cent break. We are trding now at 9.71 March futures.

Meanwhile March Chicago wheat futures traded down very close to the contract low, then bounced over twenty cents, keeping half of the bounce so far. The contract low was 4.72 back in October. We got to 4.75-1/2 on the 11^th, bounced to 4.98-1/4 on St. Patrick's Day (when I got up late and forgot to put on my orange clothes), and is now trading 4.86.

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

2010-03-16T10:11:00.001-04:00

Market Monitor

By Marlin Clark

Mixed USDA news brings lower market

Let's blame Uncle Sugar for lower corn prices the last few days. USDA released its revised Crop Production numbers on the tenth of March, and the news was mixed. The results were negative.

We have anticipated this revision with some hope that the corn crop size would be reduced. Thank God for small green apples! In this case, they were very small and very green. The revision came because at the time of the January Inventory Report, there were still a lot of acres of corn and soybeans uncut. The delayed harvest for corn wasmostly in Illinois, Michigan, Minnesota, and Wisconsin. The beans were still out in Georgia, North Carolina, South Carolina, and Virginia.

So, the good news, if you didn't live in those states, was that the crop was cut from 13.151 billion bushels to 13.131 billion as USDA included revisions in the Supply and Demand Report. The beans were cut from 3.361 billion bushels to 3.359 billion. Not much change, but in the right direction. Still record crops.

Now, the bad news. USDA is now saying that carryout at the end of the crop year will be just under 1.8 billion bushels, actually 1.799 billion. That is up from the 1.719 they estimated just last month, and up from 1.673 billion at the end of the '08-'09 crop year. It doesn't seem like much, but it is the worst category of number to be raised. This is a number that hangs over the market all year, with all the buyers knowing there is no reason to get hungry. To put it in perspective, it is the highest ending stocks of twelve years. That cannot be a good thing.

The carryout is being hurt by the slow export pace. USDA had been projecting two billion bushels leaving home, but they cut that 100 million bushels in this report. Exports have been running six percent behind projections, so they are preparing for the original guess to be wrong.

May corn futures have been volatile as lack of news, then mixed news hit the markets. The contract low was made on February 5^th at 3.59. By the first of March we had bounced 33 cents to 3.92, but it did not last long. We trailed lower for several days, then put in a low again the day after the new USDA report. That low was at 3.61-1/2, almost back to the contract low.

We have been looking forward to two things this month—the revision in crop size and the Planting Inventions Repot out March 31^st. The first did not work out, so cross your fingers for the second. Only smaller acres can help this crop right now. With big acres, only poor production can help prices later, unless there is unanticipated demand.

Hurting the chances for smaller corn acres are two unresolved factors. First, there is the matter of unplanted wheat. Acres that did not get planted can be presumed to go to another crop. In the Eastern Corn belt, that means corn or beans. Then, there is the matter of large acres coming out of expiring CRP contracts.

So, it is getting harder to imagine a scenario where we are surprised by smaller corn acres.

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

2010-03-09T10:31:00.001-05:00

Market Monitor

By Marlin Clark

Bad timing for weak market

Spring is coming to Southern Ashtabula County. I know because my stone walks are starting to burn through the snow cover we have had since before Thanksgiving. Temperatures are supposed to be in the fifties this week, so only the eight-foot loader piles will remain soon. A couple of weeks ago the section over the septic tank appeared, but now I can see stones most of the way around the house. I have a scrawny squirrel in the bird feeder, risking his life with the Lumbering Lab to try to get fattened back up. Last night we saw three different deer families out scratching in bean and corn fields where previously some scattered grain was buried too deeply to find. My 'possum got married just before winter, and has been gone for the duration. I saw one of his cousins a few days ago, so he will appear soon.

And, the phone is ringing with farmers that want to move corn for spring cash flow. Last week I expressed the hope that we could go back up and fill the report gap on the May corn chart. That has not happened. Now farmers are facing the need to sell corn for spring cash flow into a weak market that continues lower over the last few days.

May corn left a gap from 4.03 to 3.95-1/4 after the USDA January Inventory Report. Gaps on the corn charts, as I wrote last week, are usually filled. A few days have passed and we are going the wrong way. After rallying from the low in early February of 3.59 to the March 1^st 3.92 high, we have broken 21 cents instead of continuing into the gap.

The current break is not good for the timing of early spring sales. It does, however, prime the chart for another run to the gap if there is good news in the March 31^st USDA Planting Intentions Report. I know the reader is tired of hearing about that, but it is the only real, sizable fundamental news we have on the horizon. We need news for higher prices, and we are not getting it.

Soybeans, meanwhile, are arguably stronger in price, but not necessarily in direction. There we have seen a similar early February low, this time at 9.11 on the March chart, and a nearly 75-cent bounce to 9.85 on the 23^rd. From there we have seen a decline of almost 50 cents. Like the corn, we are seeing some consolidation the last few days. That is, we are seeing a narrowing of the trading range, with little change in the closing price. That is an indication of a change in direction coming, but it does not indicate which direction. It is a warning to pay attention.

Besides planting intentions, we have exports to worry about. The corn is too slow for the USDA projections, but the beans are doing okay. The lower corn prices might help move corn and catch us up. As we always say, the cure for cheap corn is cheap corn. The reality is that the market continues to concentrate on the record crop.

When USDA gave us the record corn crop news in January, they promised a March revision. We will get that next week. Who knows what that means, except we can hope that they lower the crop a little based on the corn still in the field at January one not doing so well getting in the bin. The users have little incentive to push prices to get grain because they know, with the record crop, that the grain is out there. The market is in the hands of the users, and we can't change that this year.

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

2010-03-02T10:00:00.001-05:00

Market Monitor

By Marlin Clark

Market rally breaks down

Trading continues to look for direction on the Chicago Board of Trade. A rebound rally has run out of steam and we continue to stir the tea leaves and chicken entrails looking for clues to the future.

Corn and beans had shown some progress the last ten days. Prices were inching higher, with corn especially looking towards the report gap that yawned between 4.03 and 3.95 n the March chart. In corn, the gaps are almost always filled, and that gap made a nice target.

It is still a nice target, be we are shooting at it from a lower level after Monday trading. Monday the March corn futures were higher overnight, but a loser from the beginning of day trade. Most of the day we were down eight cents, with a close down seven and a quarter.

During the overnight trading corn futures got within three and three quarters of a cent of the start of that gap, which came after USDA shocked the market with a record corn crop final estimate. The day trading considered the night traders improvident, it would seem. They chattered about the slow export pace and the stronger U.S. dollar. Those outside markets can be a reason or an excuse for the trading.

The fear in corn is that the exports could be as low as 1.6 billion bushels, if you extrapolate the current sales, instead of the USDA estimate for the year of 2.0 billion. This would be like adding 400 million bushels to the crop. We did that in the January Inventory Report and that is how this mess started.

Remember, May futures were at 4.36 on January 4^th. They lost over 70 cents to the early February low, and had rebounded 27-1/2 to 3.92. We are now at 3.82. Corn is being supported by the thought that we are headed for a wet spring and delayed planting. I cannot figure how we are thinking that this far ahead, but as long as it supports the market I am for it.

The corn may also be supported by the idea that we will plant fewer acres because beans are worth relatively more, especially given input costs. Farmers who prepaid fertilizer and seed tell me that the fertilizer took another break, but shocking seed prices made up for the lower fertilizer prices. So, we aer still ripe to reduce acres, and the market is defensive.

While the corn was breaking Monday, soybean prices held their own. Beans have retraced 44 percent of their $1.67drop, then lost nearly 30 cents again. Recently they are steady on big swings during the day.

The wheat has been discouraging, both on the Board and because the millers are not hungry for what is left around. We lost over a dollar off the price in a month, then gained half of that back by Monday. Monday was what we call an "outside day" in May wheat futures. That is, the high of the day was higher than the day before and the low of the day was lower than the day before. This is an indicator of a change in direction, but it hasn't indicted much yet. The swing was from 4.986 to 5.26 during the day, with a current trade ofr 5.04-1/2. This bears watching, but looks a little negative to start.

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

2010-02-16T09:57:00.001-05:00

Market Monitor

By Marlin Clark

More news from Virginia

Virginia this year was a lot like Ohio, only without the snow plows.

As I mentioned two weeks ago, we were in Newport News for the birth of our second grandson, Nolan Carter. That finally happened, but Squeeze talked me into staying longer than expected. If your judgment is poor, you need to marry someone who has more than you do.

Such was the case last Tuesday as we looked at the weather forecast to be in our way, and we decided to hole up for three more days. The first confirmation that we did the right thing was the 50-car pileup the next morning two miles away from us. The second was the condition of the roads three days later. On the main roads the snow had been shoved to the side, but was bleeding into the roadway. We saw almost no road equipment, but it must have been around the day before.

We stopped for the night in Winchester, a convenient location to head north to the PA turnpike or west across Western MD. The whole way across VA was interesting for a couple with a grandson born in VA and carrying the Carter name. Squeeze's family is only two generations in Ohio after 11 in Virginia. Everywhere you look is a reminder of the First Families of Virginia and their marrying habits. The Carters and Lees and Burwells all married each other, so that every home you tour has a geneology that includes Carters.

Near Winchester is Carter Hall, once the headquarters of Stonewall Jackson (whose mother was a Carter), and which is now open to the public. By coincidence the Navy officer friend of my son-in-law who escorted us onto Langley ARB for the birth of our Carter was the captain of the Carter Hall until recently, a ship named for that Carter Hall.

The Blue Ridge Mountains were frosted heavily with white, with nearly four feet of snow still piled in parking lots. The drive across the panhandle of MD was surely one of the most beautiful scenes in the country.

While we were struggling home, grain prices were making recent lows and putting some consistent gains on the charts. March corn futures have lost nearly 80 cents since early January, with most of the loss coming after USDA Reports on the 13^th. We have now traded 6 sessions above the low, including three cents of gain overnight after the three-day weekend.

March soybeans have lost nearly $1.75, but have bounced 56 cents in the last few days including a dime gain on Monday night.

March wheat, which I expected to trade on its own, has not. It has lost 88 cents, but with a recent 36-cent rebound.

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

2010-01-26T10:43:00.001-05:00

Market Monitor

By Marlin Clark

Two ugly weeks in the grain markets

Last week I referenced Shakespeare's quote about "now is the winter of our discontent.". It remains to be seen how the whole winter is, but the last few weeks have been ugly.

Corn and soybean markets used the USDA reports that were out January 12^th as an excuse to crash markets. The soybeans, that were already declining going into the reports, accelerated the decline. The result is sharply lower prices in all three commodities, unhappy farmers, and a phone in my office that doesn't ring much.

It is hard to get excited about selling me grain when corn has dropped 60 cents, beans are off $1.40 since the fourth of January, and wheat is down almost 90 cents. It is hard to be excited about talking to farmers on the phone when they want to know what to do and I don't have an opinion.

Maybe that is an exaggeration. I can usually come up with an opinion, I just don't have a strong one. I notice that the cheaper grain gets, the more I say I can see an excuse to wait to sell. Maybe we can get a bounce. By definition, that means I am resorting to the same kind of wishful thinking that is keeping the producer from selling—if the price was so much higher recently, there must be some kind of bounce.

There are two problems with this. First, the farmer wants be to encourage him to do nothing. If I agree with him, I must be right. He does not want to sell at these prices, and I am giving him an excuse. If I encourage him to sell and the prices do bounce, he will think I am taking advantage of him. Second, the charts do not encourage the idea that there will be a bounce. They make the market look like it could go a lot lower before it finds support.

Look at the March corn futures. We left a report gap. That is, after we trading down the daily limit of 30 cents, the next morning's open was lower than the previous close. We left a hole of 3 cents between the close and the next day's high, near the open. On one hand, this gap is a technical objective. That is, we almost always go back and close and corn chart gaps. Of course, there is no telling how soon that would happen. And, there is another matter—where is the downside support?

The same March corn futures chart shows the next chart low clear down at 3.40-3/4, down another 24 cents in round numbers. It is conceivable, even likely, that we will test that low. The next lows are at 3.23-1/2 and 3.15-1/2. Now, that is ugly! In reality, there is nothing to keep up from going that low if we do not inspire some confidence.

The March soybean chart is another problem. The recent low is the overnight Monday/Tuesday at 9.33-1/4. There is not any support showing on the chart until we get to the last low of 888-1/4 that was made back in early October, the harvest low. We have already blown past the old early November low of 9.55-3/4.

So, we might get back to harvest lows. Is there any good news? Well, the cheaper we get, the more excitement we can generate with less news. Any fundamental news that is bullish has more punch when prices are low. What news can there be? Better exports and usage with cheaper grain is one. Then, we are not too far away from the March 32st USDA Planting Intentions Report to think about what prices might do to acreage intentions and what acreage might do to price.

Then, there is the normal ebb and flow of the market. It is not entirely wishful thinking to hope that traders look at cheap prices and decide they are too cheap. At some level traders will want to bet on higher prices. I just hope they don't wait for those old harvest lows to get some nerve.

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

2010-01-19T09:41:00.001-05:00

Market Monitor

By Marlin Clark

Midwinter report

The January thaw has stalled here in Wayne. There was too much snow for a few days of temperatures in the thirties to melt away. Cooler temperatures are back. A couple of feet of hardpack that was left from the four feet or so that fell is now down to six inches, with a few bare spots peaking through. I can see gravel in parts of the drive.

A black track runs down the middle of the road, where the sun and traffic has finally defeated the four inches of ice that was Howard Road. I saw a township trustee in Crossroads Restaurant two days ago and he asked me how the road was. I told him it was starting to thaw into slush. He said after it melted a little they might plow it. That seemed backwards to me, but the only township roads that are bare are the ones the dairy farmers have plowed themselves.

A pair of squirrels, that Squeeze calls Albert and Victoria, are gamboling on the icy crust. They are safe for now from the Lumbering Lab, since he is breaking through the crust and can't chase them. One day soon they will lose track of the Lab and become a splash of color in the monochromatic landscape. I can see it now—a bit of orange belly and red tail and rear legs hanging out of the mouth of a black dog on a white background.

The 'possum that I wrote about last fall got married, then disappeared for the winter. I saw him with his wife twice under the bird feeder, then they were gone. I got smart and replaced the feeder with a birdy mansion that holds an entire 40-pound bag of sunflowers. That is becoming a major budget item as the snow covers alternative feeding areas.

The stone path around the house has crept out of the snow. The part over the septic tank of course appeared first. There are no apples left under the Northern Spy tree. They are the last to go, as the deer come calling every night. The other trees are in the open, and the apples are easier to get. By the time the Northern Spies are gone, winter is usually over. This means the deer will go back to gnawing on my young hardwoods in the south lawn, which continue to struggle to get established.

Oh yes, the grain markets crashed after the USDA Inventory Report last week. After the first flurry of calls, the phone has gone dead, as farmers try to adjust their thinking to corn futures that have lost 58 cents and soybeans that are down over a dollar. It is not nice to surprise the Chicago Board of Trade.

What was the surprise? How about a new all-time record corn crop on top of the record soybean crop? The market was shocked, shocked to find that USDA raised the crop size in the final Crop Production/Inventory Report instead of lowering it as expected. USDA did say they were going to take another look in March, since there was still as much as five percent of the crop not harvested. Still, they are convinced we raised 13.151 billion bushels of corn and 3.361 billion bushels of beans. Last month they had the crops at 12.820 and 3.338 billion.

Sol, the USDA pattern of being conservative about big crops held. The old saw that big crops get bigger got proven. USDA may have thought earlier that the crop was this big, but they steadily increased the numbers until the end.

Now the market recovers from the surprise. Now the traders adjust to new fundamentals. For the farmers, now is the winter of our discontent over grain prices.

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

2010-01-12T09:38:00.001-05:00

Market Monitor

By Marlin Clark

Some days you can't win, writing a marketing column. Readers think you know something, and you hope to preserve that illusion so they will continue to read.

Today that can't happen. Today I have to write this just as USDA has released the report that is hanging over the market as maybe the most important of the year. And, I have to react to that release before the market opens. On the surface that looks easy. I have the numbers in front of me. In fact, the big question now is the twist the traders will put on the numbers. That is, is there any real surprise?

This Tuesday morning as I write this, USDA has released at 8:30 our time the Annual Crop Production and Planted Harvest Summary. Also released this morning, but not quite so critical, is the USDA January Supply and Demand Report.

At first glance, there is one surprise right away. USDA now says we raised a record crop of corn, in addition to the record crop of soybeans we already were pretty sure about. The cynic would say that is why corn went down nine cents on the overnight session—the traders had inside information. More accurately, the traders lost nerve before the report and sold off.

USDA now says the crop is 13.151 billion bushels. They do admit that they will be revising the estimate in March. As much as five percent of the corn crop was never harvested, and it remains to be seen what the losses from winter weather will be.

This is the year of the topsy-turvey crop. It went in late in most places, then seemed to stagger with a lack of heat. Yet, when the combines hit the fields farmers were very pleased with yields. Then, the harvest was delayed by wet weather. That led to a contra-seasonal harvest rally as the market worried about supplies.

Now, it looks like they did not have to worry. After all the action, we came out with a record crop. There is one lesson to be learned from that—cool weather does not affect the overall crop like hot weather. We think we want hot weather, but that means it is too hot in some areas and those farmers are losing yield. It may also mean that our modern varieties have more vigor in cool years than we realize. The coolest summer on record in most of the Midwest produced the largest crop.

USDA had put the crop at 12.921 billion bushels in the December report. Most traders thought the crop size would be cut, and the average guess was 12.82 billion. So, the market starts in an hour with 330 million extra bushels. That cannot be good for prices. It will encourage those farmers who sold ahead of the report as a matter of discipline.

On this report, ending stocks for August 31, 2010 are estimated at 1.764 billion bushels, up from what was already a high 1.613. In pure numbers that is a high number, and reminiscent of years of low prices. As a percentage of the crop, however, which is more important these days, it is onerous, but not overwhelming.

The soybean crop came in at 3.361 billion bushels, up from the already-record 3.338 of last month. That will lead to 245 million bushels left over at the end of the year according to USDA, up from 237 in the December report.

The question of the last few days in my office has been, what is moving wheat prices? July wheat futures have gained nearly 50 cents in three weeks. USDA says the wheat plantings are down 14 percent from last year, and this is significantly more than traders had thought. 37 million acres are planted, against last year's 43.3. This leads to 200 million bushels less wheat than the smallest pre-report trade guess.

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

2009-12-29T10:17:00.001-05:00

Market Monitor

By Marlin Clark

The silly season is upon us

In NASCAR the so-called "silly Season" is that period at the end of the year when teams are realigning. Drivers are going to other teams, teams are changing leadership or swapping drivers. People are hired, fired. Everyone knows this next year is the year. Just ask the Cubs or, for that matter, the Indians.

In the grain markets the silly season tends to come in last half of December. Traders take time off before or after Christmas and New Year's holidays. Commercial hedging can be heavy just before or just after the first of the year, depending upon the bent of the farmer who may need to sell or to hold grain for tax purposes. The heavy or light hedging may distort the market direction. Trading gets a little weird just because everybody may not be on the floor, and the market does not have the same liquidity.

Or, maybe I am just looking for a reason or a lack of reason for recent market activity. Prices were sharply higher Monday on the Chicago Board of Trade, after the Christmas break. March corn futures closed up seven and a half cents at 4.16. They actually hit this price and went through it right after the open, then traded lower than that most of the day before a strong close.

January soybeans on the Board finished up nearly 30 cents, but were just barely positive in the middle of the session. March Chicago wheat futures were up over 26 cents, but only up 6 cents for the middle of the day.

Most interesting is not the Monday trading, but the last few days. All three grains have made significant gains in the silly season, and we are now hoping that we don't give them back away when the boys all come back to town.

March corn futures had a December 18^th low of 3.91, then made the high Monday at 4.18-3/4. That is almost a 28-cent gain. January beans have gone from 9.84-1/2 on the 22^nd to 10.34 on Monday, up 50 cents. March wheat has gained 35 cents since the 17^th. That doesn't seem so silly, if we can hold on.

So, we ended Monday poised for a big Tuesday, right? Wrong, corn bread breath! Corn futures on the overnight going into the Tuesday session are unchanged, the beans are down six and a half cents, and the wheat is off a nickel. With Christmas on a Friday, we are trading more like a three- or four-day weekend.

Anything can happen today, and the rest of the week. Nothing means anything until after the first of the year. Well unless you are one of the farmers who sold me corn with the price up 8 cents yesterday. Then, it means something.

And, that is where we are—staking out lines in the sand, saying, maybe I can sell something here. Maybe I should worry that prices get cheaper. Maybe I should listen to the talk that South America is going to plant more beans than ever before. They should, based on the dollar price of soybeans, so where is the surprise? Maybe, heaven forbid, the dollar price of soybeans is not so important anymore, like the Arab countries that want to trade oil in Euros.

Our currency has gotten so cheap that we are starting to forget that the Euro started out as the European dollar. It was the new currency of the new EEC, formerly the Common Market. It started out at par with our dollar, but now it is worth so very much more.

Maybe we have forgotten when we could just trade grain and not worry about things like the value of the dollar.

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

2009-12-15T09:44:00.001-05:00

Market Monitor

By Marlin Clark

Uncertain markets lead us out of harvest

Sometimes I forget what business I am in. Yesterday a customer who buys corn in Central PA made a remark that is significant. He said that crude oil was going lower, so he supposed the grains would all be slipping off until that stabilized.

Time was when a grain commodities dealer did not have to be an expert, or at least conversant, with all other commodities, precious metals, and the value of the dollar. That time is gone. Now the markets are interconnected in odd ways and on a given day the price change in Chicago is not because of anything in the grains.

Historically wheat, then soybeans reacted strongly to some outside markets. Commodity traders who are dealing in gold and other metals may view soybeans as just another valuable commodity. If gold goes up, maybe soybeans are worth more. Or, in our current market, maybe gold is going up just because the value of the dollar against other currencies is going down. This makes the gold higher priced in dollars, but not necessarily more valuable. All those adds about buying gold because the price is going up are really about shorting the dollar.

On the other hand, corn prices now are strongly and directly related to crude prices. With a significant portion of the entire crop going to ethanol production, the price of crude oil, then its gasoline derivative, makes corn prices go up and down. If gasoline declines, it makes the ethanol portion of it worth less. That tends to lower the bid for corn at ethanol plants. If the ethanol plants, for competitive reasons, can't lower prices, they lose money and down the road may close. That lowers demand for corn and brings lower prices later.

All that to say this: prices are bouncing around, and it is hard, from purely a grain perspective, to say why. The only real fundamental news coming is the USDA January Inventory Report in early January. I have been talking about that, and it is finally not all that far away. After this delayed harvest, we will finally get to find out what the crop sizes really are, as measured in bin space. The hope would be that the crop is smaller, due to harvest losses. The reality is, that except for the heavy winds of last week, there has been little to hurt the standing corn. And, the last of the fields are often the best.

The trend of a big crop is to get bigger. Part of that is the USDA methodology, which seeks to make several small changes as they perceive a bigger crop, rather than to shock the market. Part of that is that we just are having trouble coming to grips with the idea that the sun hardly shone this summer, but we are close to an all-time record crop.

In December we have seen March Chicago corn futures at 4.21 on the 1^st and at 3.78 on the 9^th. We got back to 4.10 on Monday, but are closed the Tuesday early session at 4.05.

At the same time January soybeans were 10.78-1/2 on the first, 10.19 on the tenth, and back to 10.59 on the 14^th. The early Tuesday market closed at 10.52-1/4.
Without a surprise in the January reports, we have no reason to get back to the highs. Well, at least not from the grains themselves!

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

2009-12-08T10:04:00.001-05:00

Market Monitor

By Marlin Clark

Market turns back south

Last week we looked at charts, trying to find signals of direction. Well, we know more about direction now.

Corn prices broke sharply on the Chicago Board of Trade this week for no particular reason I can think of. That should give you confidence that you are not wasting your time reading this!

Actually, the biggest reason I can think of is the one we looked at last week—technical analysis. Last week I said that sometimes the markets, in absence of fundamental supply and demand news, trades by looking at the charts. That seemed to be fulfilled this week.

Take a look at what I said: "Taking a look at March corn futures, we see that we are working on a triple top formation. This is a strong signal. It can mean that the overhead resistance, which is the line that connects the three tops, is getting stronger. It can mean that we need really big news to break through that line. On the other hand, it warns us that, if we do break through, we will make that the support line, and may trade strongly above it, with an opportunity to trade as high as the next high back on the chart.

"With March corn futures, that means that we have strong resistance to prices going higher at 4.25. We hit 4.24-1/2 on October 23^rd, then 4.25 on November 18^th. Monday we got to 4.20-1/4, but also had 4.07 the same day. The overnight electronic session closed just below 4.18. So, we are making a run at the highs, and we are currently failing."

Even a blind hog gets an acorn once in awhile. Corn and wheat markets are sharply lower this week, with corn breaking 37 cents off the 4.21-1/4 December 2^nd high, then recovering most of two cents overnight Monday night. If you think about it, that means that once again we experienced that dreaded "Turnaround Tuesday." We made the high Tuesday, and then went nine cents lower the same day. Also notice that we did not quite get back to the 4.25 double top area. We ended short, and that was a negative signal.

Now if we go back to the chicken entrails, err, March corn chart, we could see a support line that connects three lows before the recent break. Draw a line line connecting the last three lows and you learn something. The three successive lows were improving. That is, each low was higher than the one before it. We were 3.72-1/2 on November 11^th, 379 on November 9^th, and 390-1/4 on November 24^th. Extend that line and you find we broke through what we hoped would be support when we went to 3.84-1/4. Depending on your drawing, that is most of a dime below the line.

So, as we continue the technical analysis, we have to be discouraged about corn prices. Our best chance to sell corn just passed, and it was at an unusual time—while harvest was finishing. Our next chance for news does not really come around until the January USDA Inventory Report. If the yields in the country as a whole are like the ones around my home, the hope of the crop being smaller to help prices is gone.

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

2009-12-01T10:21:00.001-05:00

Market Monitor

By Marlin Clark

The rearview mirror market

It is hard to get a handle on where markets are going these days. The easiest method, with the least recriminations when you are wrong, is to look in the rearview mirror. Volatility and outside markets are confusing things right now, but the charts give a fairly clear picture. Grain prices have been jerked around by weather –driven harvest delays and the mood changes in the markets because of them. The price of gold and the (related) value of the dollar against other currencies has meant more to the market some days than supply and demand.

Chart analysis, or technical analysis, is an attempt to predict where we are going by looking at where we have been. There have been clear signals on corn and bean charts lately, but that does not necessarily guarantee the future.

Taking a look at March corn futures, we see that we are working on a triple top formation. This is a strong signal. It can mean that the overhead resistance, which is the line that connects the three tops, is getting stronger. It can mean that we need really big news to break through that line. On the other hand, it warns us that, if we do break through, we will make that the support line, and may trade strongly above it, with an opportunity to trade as high as the next high back on the chart.

With March corn futures, that means that we have strong resistance to prices going higher at 4.25. WE hit 4.24-1/2 on October 23^rd, then 4.25 on November 18^th. Monday we got to 4.20-1/4, but also had 4.07 the same day. The overnight electronic session closed just below 4.18. So, we are making a run at the highs, and we are currently failing.

The March corn futures are way above the pre-harvest low of 3.15-1/2 on September 8^th. The slow harvest, and a reduction in the predicted crop size was part of that. Outside markets added the rest. If we could, in fact, break through the resistance, the sky is the limit. The last high before harvest was clear back in June. Then we traded daily highs of from 4.78 to 4.82 for eight days.

Now, the soybeans. January soybeans have shown steady gains since the low of 9.51 in early November. We traded an overnight high Monday/Tuesday of 10.74, a buck and a quarter higher in less than a month. In the process over the last two days we have broken through the old high of 10.58 made in the middle of August when we were worried the crop was in trouble. In between we had an August low of 8.85.

So, we have broken the old high. Now our objective is 11.05, made the 11^thand 12^th of June. Realistically, however, we can look at these three highs as forming a line of resistance. If we connect them, we can argue that we are already topped out.

So, what kind of news can make a breakout? The delayed harvest can help, but the market is not reacting too strongly so far. We will know more in a few minutes when we open. Yesterday we learned that the corn crop was still only 79 percent harvested in the country, although Ohio is ahead of that. We should be done. There may be harvest losses, but local talk of yields in some fields as high as 265 bpa is not encouraging that idea.

Meanwhile, basis nationally is at a five-year low, at minus 55 the March. Imagine the basis if we had got the crop off fast!

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

2009-11-23T09:40:00.001-05:00

Market Monitor

By Marlin Clark

Harvest struggles to its conclusion amid volatility

When prices go up and down, sometimes without reason, we call it "volatile." When we can explain it, we describe cycles and retracements and corrections. We have a basket full of adjectives to describe the chicken-entrail sketching on our charts.

This market we just describe as erratic. That means it has evaded the grasp of our vocabulary, and we are just reporting what happened. No one in his right mind is predicting what is next, but is rather just speculating on what can happen.

Part of what can happen will be speculated upon or even predicted by the brave and foolish, this afternoon after the latest USDA Crop Progress Report. The corn crop, which should have been binned three weeks ago, is still partly in the field. This afternoon Uncle Sugar will tell us how big that part is.

The delayed harvest has helped prices on some days. Those are the days when traders feel the crop will never be finished and we are losing some of the supply we thought we had figured into prices. Some days prices go down. Those are the days when traders think that it doesn't matter how long harvest takes, the corn is still there and it is a big crop.

Producers have been more focused on space than on price. Some have looked ahead to sell deferred corn on days the market has been better, and that makes sense. I quoted 4.20 ti a man this morning for corn I would pick up at the farm in January of 2011.

Mostly though, farmers are just selling enough to get the crop in the bin. Then, they will sit on it, dreaming of $7. Or $4.50, or $5 or some other magic number which, when we get there, they will think is too cheap. The hardest part of farming is not getting this harvest finished. It is doing the marketing. This is probably so because you are on your own. It is not your fault if it rains. It is your fault, and least it reels that way, if there is a high price for corn and you pass on it until it gets cheaper. It feels like everyone is in the same boat with the weather, but each marketing decision floats or sinks on its own.

The good news about corn for the harvest season is that it has gained over $1 a bushel in recent times. On September 8^th, with a crop report for the second biggest harvest in history staring us in the face, we made a recent low on December futures of 3.02. Delayed harvest, added to a small cut in USDA expectations in the November USDA Crop Production numbers helped us get to 4.13-1/2 December futures on October 23^rd. Now, a month later, we are trading just under $4.00, after a dip to 3.59-1/2 on November 11^th.

So, a dollar up, 75 cents down, 50 cents up and ten cents down (rounded off) pretty much describes a market that is erratic.

Meanwhile, the last ten trading sessions have shown steady, strong gains in the soybean markets. Yes, we had an ugly low October 5^th at 8.85-1/2 on the January futures, but after one short cycle we have been higher. We had a $10.29-1/4 high on October 23^rd, then dipped to 9.74-3/4 four days later. Since then we have been up, to the overnight high this Monday morning of 10.66-3/4. This is nearly identical to the 10.68 high made in the middle of August. You have to go back to June 11 and 12 to find a higher price. Then, we wondered if the crop would ever get planted, and we put in the 11.05 contract high.

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

2009-11-17T09:53:00.001-05:00

Market Monitor

By Marlin Clark

Harvest drags into Thanksgiving

USDA released the Sunday night Crop Progress Report Monday after the close, and it was not pretty. Harvest still drags on, and rain coming into the Midwest this week will not help. Thanksgiving will come and go with corn and even soybeans still in the fields.

One of the biggest traditions of my youth was that we gathered for a noon Thanksgiving dinner, and then piled on the Carharts for one more push with the corn picker. This was in the dark ages, when we thought planting corn by the end of May was okay, and picking 250 acres of corn with just a two-row corn picker was high tech! It was, if you remembered opening fields by hand and picking corn into flat wagons, then shoveling them over your head into wooden slat cribs. I remember the first elevator, and the first time I saw silage wagons with a winch on the rear that pulled most of the corn off the wagon. Pardon me, I have slid directly into geezer mode.

The delayed harvest is the biggest reason for some volatility in the markets that set new benchmarks for the period on Monday's trading at the Chicago Board of Trade. December corn futures traded over $4.00 and January soybean futures bested $10.00. These are huge psychological numbers, and represent a significant bullish mood in the markets. The move is being described as "short covering." This means traders had sold the market short, anticipating harvest catch-up and record crops of beans and near-record crops of corn.

In fact, the market slogs on, still worried about the harvest and harvest losses of yield and quality. The end of day reports would be thought to encourage the market overnight, but the big news is that it went down, with corn and beans both off nearly a nickel. The December corn is now back below $4, but the soybeans hover just above $10.

The overnight correction would reflect that the harvest progress numbers were not really as bad as what some traders feared, and that they were already "in the market."

Looking at the reports we see that the nation as a whole is up to 54 percent planted.That is up from 37 percent, but is sadly behind the 77 percent of last year and the five-year average of 89. Ohio is slightly ahead of that, but only at 58 percent. I would not have been surprised if the number was 70, with the good weather we had locally, but there are a lot of acres to go. Our harvest is being slowed by wet corn, also. Farmers are reporting to me that the corn is wet enough that they can only shell for half a day before they run out of dryer capacity.

Iowa has caught up to our pace and reports have them 59 percent done, a gain of 25 percent for the week. Illinois is similar to us, at 52 percent, but gained 19 percent.

The nation's bean harvest still lags at 89 percent, with a 96 percent average.

So, this might be Turnaround Tuesday for the bulls, with the overnight pointing to lower markets. Adding to the negative news is the CBoT deciding to put a vomotoxin specification in the corn contracts. There is so much high-vomo corn around from this delayed harvest and cool summer that the Board is worried it gets delivered to Chicago. Three years ago the Board did the same thing to wheat and it contributed to a lack of convergence between cash and futures prices. Expect this to contribute to lower basis in the country.

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

2009-11-09T10:12:00.001-05:00

Market Monitor

By Marlin Clark

In the dark, with guesses

The market is poised for action on Monday as this is written. USDA reports that can move the market are anticipated, but we are all in the dark at this moment.

Monday, after the close and after this is written, USDA will release the weekly report on harvest progress. Then, before the market opens again, we will see the USDA November Crop Production Report. These reports can be negative to prices, or positive, or even work against each other. Interesting times, and I get to make some guesses here because we have a day and a half to go to some answers.

Prices trended sharply lower last week as traders seemed to believe there was good harvest progress being made for a change. It remains to be seen if that is true, but we were sure coming from a long way back. Last week USDA told us we were all the way up to 25 percent harvested on corn! We should be rounding third and on the way home!

Even while the market was expecting big gains, the weather was spotty. Around NE Ohio, the combines were rumbling, and so were the complaints about how wet the corn was. The complaints about the yields were not so universal. There have been pleasant surprises. Those with high-test weight varieties have also had some good yields. One large farm operation in Trumbull County is reporting 200 bpa corn. That is not as good as the record yields of last year, but it is notable in a year of cool temperatures and worries about that effect on the crop.

We still have beans standing in some areas. Where the beans were being chased, the corn is not catching up. So, the USDA numbers will be interesting, then they will be dissected, then they will be disagreed with.

Remember, the perspective of the last big reports was for a record soybean crop and corn crop second in history. Along with the 13 billion-bushel corn crop was a usage slightly higher than that. The usage was supposed to blunt the size of the crop.

Last week corn prices declined the last three days on the Chicago Board of Trade. It is only in the Monday morning electronic trade before the pit opening that we have seen an upturn. December futures put in the recent high on October 23^rd at 4.13-1/2, then declined 54 cents in a few days. The futures then bounced 39 cents by the 4^th. We closed the week at 3.66, but are now trading 3.72.

With the November soybean futures now into the delivery process in Chicago, we are looking at January beans. The perceived catch-up in the harvest caused steep declines last week. We nearly matched the recent high on the 4^th, at 10.22-1/2. (We were 10.29 ten days earlier.) Three rough days on the market as the combines ran got January futures to a Friday close of 9.55, down 67 cents in three days. Overnight we have got that back to 9.62.

I expect the market to be shocked by corn harvest numbers that are still in the 50 percent range. This would be part of the explanation for the bounce overnight. However, improving weather will mean the delayed harvest has just about run its course in the attempt to push prices higher. The rain later in the week came out of the forecast this morning. A good week puts the crop in the bin and the reality of the huge crops back in the spotlight.

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

2009-11-03T10:21:00.001-05:00

Market Monitor

By Marlin Clark

Slow harvest, fast market

Dece3mber corn futures gained nine cents in the last five minutes of trade Monday. Traders seemed to be reacting to fears of lack of harvest progress. USDA released new harvest numbers after the close that seemed to confirm the bullishness.

December futures had a 24-cent range from high to low Monday. We had a spike high ten days ago (Octoberer 23^rd) at 4.13-1/2 December futures, but a low Monday of nearly 3.59. The high, just before the close, was nearly 3.84!

November soybeans had a 44 cent range, posting a 10.06-1/4 high. We were back to 9.89 when the overnight session closed, but that was more than a dollar above the October 5^th low of 8.78-3/4.

Prices have been volatile lately, and much of the bouncing around has to do with the deferred reality of the record bean crop and near-record corn crop we are trying to bin. This week again we made little progress on the harvest, and now it is November. The Halloween trick this year was continued rain that allowed intermittent field work in some areas, none in others.

Passed onto me via e-mail yesterday were a series of photos of a harvest near-disaster. It showed a tracked grain cart buried in the mud on one side badly enough that the track was out of sight and it was nearly tipped over. Two four-wheel drives and a track hoe were being used to excavate it. Maybe that is "extricate" it, but the first is closer to reality.

The reality of this harvest has yet to be realized. Do we have over 13 billion bushels of corn if three-quarters of it is still in the field the first of November? What are the harvest losses going to be? What about yields 20 bpa less than last year, with much of the loss being in lower test weight? What about vomotoxin problems that have corn in some areas being limited in where it can be sold? What about even ethanol plants with vomo problems as they try selling DDGS that has a vomo test of 15 parts per million?

The questions continue. What about soybean harvest losses? The farmers can't be getting all of them in the mud. The Delta farmers are losing theirs completely with flooding. So, is this a record bean harvest or not?

USDA provided some insight in the harvest progress numbers, but the January Inventory Report may be the real market mover. The government has the corn crop only 25 percent harvested, up just five percent from last week. That is less than half where we were last year, and the normal is nearly three times that, at 71 percent. By now it is normally only the northern areas that are not done, like in NE Ohio and NY. This week Ohio was spot on the national average, at 24 percent. We gained seven percent from last week, but lagged last year's 68 percent and the normal 60.

When you think of corn, you think of Iowa, and they are worse off than us, as is Illinois. Iowa has 18 percent of the corn off, and Illinois is at 19.

The lack of corn progress can be blamed on the slow bean harvest. The corn is standing. Snow will soon take down the beans. The U.S. is still only 51 percent harvested on the soybean crop. We cut seven percent last week, but normal is 87 percent, with only the Delta usually dragging any big acres.

So, the tale of this harvest is not over. We will be talking about it for years, and the markets will be reacting until well into next year. I continue to think these harvest delay bounces are selling opportunities. Sometime next year we will know if I am right.

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

2009-10-27T10:05:00.001-04:00

Market Monitor

By Marlin Clark

Price correction on improved weather

Ya got ta love a market that crashes on the hope of better weather. USDA released the regular harvest progress report after the close Monday, but during the day the market crashed on news of better weather forecast.

Traders were apparently anticipating that there had been significant harvest progress for the week, and that there was good weather ahead. After the close we found that the progress was still painfully slow. The better weather that will allow periods of harvest has yet to be realized.

Certainly elevators were seeing a good run Monday and Tuesday, but both the bean and corn harvests are historically late. Many NE Ohio producers are still barely over half on the bean harvest. Those who have finished have shown little push to harvest corn because it is still quite wet. The high prices of drying gasses has imposed more discipline that usual the last few years. Locally I am seeing some corn harvest of historically wet ground, but mostly just an "opening up" process. A hard freeze has helped get the last of the green out of the stalks. This is the week I expect corn harvest to get going more generally. However, no one is going to get excited about corn with beans still out.

And, the beans are still out in Ohio. USDA reported Monday that the Ohio harvest was at 75 percent, which is behind last year's 87 percent, but ahead of normal (78 percent). This would indicate that Ohio is much better off than other areas. The US as a whole is at 44 percent, barely more than half the normal pace of 80 percent. That was up only 14 percent for the week, and October is over this week. Leading states of Iowa and Illinois are a major reason for the slow progress. Iowa is at 47 percent, and Illinois is only a third done.

The corn is a similar situation, only maybe worse where farmers have not even started. The nation as a whole is at 20 percent of harvest. Normal is 58 percent. We gained only three percent last week. Ohio is similar to the nation's trend. We have done 17 percent of the corn, up from eight last week, but terribly behind last year's 52 percent and the average of 45. Iowa is at 33 percent, where the average is 86.

Markets had made contra-seasonal highs because of fears generated by a late harvest. A late harvest assumes some loss of yield and quality, and puts immediate pressure on a pipeline that is low is supply. The perk in perceived weather broke prices dramatically Monday. Corn and beans were both down nearly 20 cents on all contracts. The wheat was down slightly more than 20 cents.

It would not have surprised me if we had not seen gains overnight, as traders digested the USDA reports. They would have to be thinking the harvest had been overestimated. This did not happen, as prices are marginally higher on the overnight. The day time open will show us the true mood of the market. The big crop forecasts, if realized soon, will still reflect a market that is overpriced on harvest concerns.

But, the market has proven that any glitches or surprises will have outside consequences in prices this year.

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

2009-10-20T09:55:00.001-04:00

Market Monitor

By Marlin Clark

Contra-seasonal rally

In the normal order of things, prices go down as we approach harvest. Not this year. Prices have rallied sharply in corn, beans, and wheat, and market watchers like me are stumbling around looking for a reason.

Last week we talked about surprises in the USDA Crop Production Report. Uncle Sugar says the corn and bean crops are even bigger than expected, but prices refused to go down. I gave as excuses for the market action the delayed harvest and frost worries. The frost worries were a little too late to be a concern.

So, what do we have for the last week? A little retracement, then back near the highs.

Rains continued until the end of the week, so harvest progress was slow. Thursday night had snow flurries in Cherry Valley, and two inches of snow in parts of Western PA. Sunday was beautiful, an example of why we like to live in Northeast Ohio. Monday through Wednesday are supposed to be similar, only warmer, so look for the bean harvest to go a long way toward catching up. That catch-up will be at the expense of the corn harvest, however.

Monday USDA released the current estimates of harvest progress, and it is ugly. The US has beans at 30 percent, up from 23 last week. That is way behind last year's 64 percent, and the normal 72 percent. Ohio is similar to the nation as a whole. We had 34 percent harvested, up from 28 percent, but less than half of last year's 77 percent. Last year was ahead of the normal 68 percent. Some Western Corn Belt states are even worse. Iowa posted 37 percent harvested against a normal 85 percent.

The US has corn 17 percent cut, up only four percent from last week. That lags last year's 28 percent and the average of 46 percent for the last five year. We are hugely behind. They show Ohio at only eight percent, up just two percent from the week before. Frankly, I wonder who could have done that two percent. Last year this time we were at 35 percent, a little above the average of 31. Some of the biggest-producing states are the worst. Illinois has an average of 68 percent harvested at this time, but came in at only 11. That was up five percent for the week.

The market will continue to focus on harvest progress, and maybe that will drive prices, but expect volatility. Recent moves have caused producers to put in targets which may be unrealistic once we get the huge crops in.

November soybeans made a low in early October at 8.85-1/2. Harvest delays pushed that to $10.13-1/4 in a little over a week. This week, on the 15^th, we retraced to 10.02-1/2, but we traded a high of 10.08-3/4 overnight Tuesday morning.

The December corn was near $3.00 in early September, but had hit 3.88-3/4 by last Wednesday, the 14^th. of October. That did not hold, as we retraced to 3.68-1/2 the next day, but the overnight this morning put in a new recent high of 3.89-1/2. It would appear that the delayed bean harvest market is becoming a delayed corn harvest market.

While this was going on, December wheat futures were putting in the bottom in Chicago. Wheat has been in steady decline since the first of June, when the December put in a 7.25-1/4 high. October 5^th we bottomed at 4.39-1/4, and we have rallied as high as 5.29 on the 14^th. Currently December Chicago wheat is at 5.18.

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

2009-10-13T10:10:00.001-04:00

Market Monitor

Head scratching in the Corn Belt

By Marlin Clark

It wasn't that long ago that I was telling callers that we would go back to test the 3.02 December futures low on corn. I was also leaning to the idea that soybean prices had been supported by old crop shortage and good demand, but prices would decline as soon as we could sniff the new crop.

To say that these things did not happen is an understatement. December futures hit 3.83-1/2 both Monday and on the overnight Tuesday AM. This is the highest price since June 30^th. November soybean futures have rallied $1.33 since the fifth of October, to 10.12-1/4 overnight Tuesday morning. This is close to the August 30^th high.

To say I was wrong is an understatement. My head-scratching is causing a rash. Soon this will be known in my office as the bloody scab market.

The amazing thing is that this rally comes as the government is telling us the crops keep getting bigger. Friday USDA came out with a production of 13.018 billion bushels of corn, up from the 13 even of last month. The soybeans were increased by five million bushels, to 3.250 billion. Friday's reaction, after the report, was for beans to be up 28 cents. Corn was down a coupla cents on a confusing, what-do-I-do-on-a-Friday 15-cent range.

Traders made up their mind on corn Monday, pushing December futures 19 cents higher. The question remains, why?

Two factors are pushing prices. First, for all the talk about big crops, the crops are late and winter is coming. In the heart of the Corn Belt, little corn is off and the beans are being cut only on the second day after the daily rains. That means, mostly not at all. Bean combines were running in my neighborhood Monday, but most areas were still rained out from Friday.

The second factor is a disagreement about reality. Try to find a farmer or an elevator manager who agrees with the USDA numbers! We had the summer without sunshine, and corn is still green. The corn that is off is resulting in grumbling about low TW, with a lot of 52-lb. stuff being talked about. Hopefully, we end up with 54 for a crop, but if you are in an area that 58 or 60-lb corn is normal, you can be looking at 10percnt off that near-record crop right there. What if a TW problem represents a billion bushels less corn?

It is not just corn TW. Farmers are talking about widespread white mold in soybeans and ear rot in corn. So, we might have quality problems to add to reduced yields.

Now, USDA is easy to beat up. Farmers generally believe that the government plays games to manipulate prices. I don't believe that is true, but the mythology of this is large. An example of this not being true is that fact that "large crops keep getting bigger." In fact, this is USDA not wanting to put in big numbers one month, then taking them out the next. They stay conservative with the large crop projections until they really are convinced, and they add to the crop estimate each month.

So, which is it? Do you go with USDA or with your gut? Is your gut your excuse to do nothing? With these gains, it should be time to reward the market, but the impulse to wait until the bins are full is strong.

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

2009-09-29T09:29:00.001-04:00

Market Monitor

By Marlin Clark

Swimming into new crop

The best thing I can say about the three inches of rain I have dumped out of the rain gauge over the last few days is that it did not come in October. Much of the corn has been chopped, and the beans are not ready. We don't need the rain, but it is not holding harvest up much. I would hate to be trying to plant wheat, however.

Still, this is the time of year when we worry if we are going to have 60's and sunshine or if rainy fall runs into snowy winter. I remember picking corn on an open tractor in 15-degree weather, and I shiver from the thought. I remember the fifty acres of beans we ran on frozen ground in February, and trading grain seems like an easy way to make a living.

This is the time of year when I starve out my truckers as we hunt for the last give-up bushels of corn. Farmers are tempted to leave them in the bin now that they did not sell them a dollar ago and they are not sure of the size of the new crop.

Trader talk this time of year is all about USDA projections and why the traders know better. The market trades the USDA numbers like they come from the Book of Revelation, but they talk out of the side of their mouths about why USDA is wrong.

Take your pick of suspect guesses by the government gurus. The corn crop is not nearly 13 billion bushels. The summer was too cool for the corn to do that well. The usage next year is not going to be over 13 billion bushels to bail us out of the big crop. Uncle Sugar is expecting way too many corn bushels to go into ethanol when that industry is still running losses.

Soybeans are subject to some of the same scrutiny. The support in bean prices while the corn was dropping was due to the shortage of old crop beans, the traders argue. We were told in January that we would run out, and now in September we have not, but it has been close. The high prices have rationed usage. The bean processors that would not contract meal because they worried about having beans to crush are now smelling new crop. If it would stop raining, they would have it.

So, if it was the old crop shortage that supported prices, the argument is that the new crop will collapse as soon as we start filling up bins with the new crop beans. In fact, there is a near inversion in the soybean market that would confirm that thinking. The highest-priced month is January, just a nickel over November. There is a penny carry to March instead of a normal ten or 15 cents. July futures are essentially the same as November.

It is encouraging that corn has not gone to zero, though it made a run at it. We are actually forty cents off the December futures low of 3.02 on September 8^th. There has been a lot of volatility to confuse things. One day we were up four cents and the next down for cents. The optimist says we are going higher, the pessimist says we are going lower, and the realist says the market did nothing for those two days. I am reminded that Pappy always told me that there are three kinds of people in this world: pessimists, optimists, and realists. He says no pessimists should farm and very few realists do.

The realist in me says there is nothing new under the sun. Eventually, and soon, the crops will be off and we will be smarter, but not necessarily wiser. The corn crop will be smaller than expected, or larger, or the same. The big crop keeps getting bigger statistically by the USDA method, but the corn is not corn until it is binned.

Soon the talk will be about the high price of propane to dry all the corn, and farmers will be complaining about how cheap my price is for the bushels they have left over that they didn't think they were going to have a couple of months ago.

Then, the combines will get parked, and the hard work begins. Growing it is always easier than selling it.

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

2009-09-22T10:00:00.001-04:00

Market Monitor

By Marlin Clark

The Squirrel and the 'Possum

A story of American Agriculture

I have had bird feeders close to the house for 35 years. The bear tore them down a couple of times a few years ago, and we had to stop feeding for a month. Other than that we have always fed a herd of a few hundred "livestock" as I call them. Most of the customers are very regular. The chickadees are nearly tame, and stay in the lowest branches of the tree when I am filling the feeder. One frozen goldfinch let me pick it up on my finger last winter.

Fairly regularly when I take the "boys" out, I have to tap the glass on the door to scare away a squirrel. If not, the "boys," a black Lab and a white Westy, have to chase it instead of doing what I took them out to do. Some people try to keep squirrels away, not wanting to seed sunflowers wasted, but I figure he is just getting fatter, and he is fun to watch, and he is likely to just be a bigger meal for the Lab some day.

At night I have to watch for the 'possum at the base of the feeder. If I don't warn him we are coming, he quivers a little, then passes out. I have always heard that they "play possum." Not so. Some chemical, the opposite of adrenaline, hits his blood stream when he sees Chubbs, and he never moves another inch.

I think of these animals as I watch the grain markets these days. Corn seems to be headed to zero, if you are a farmer who remembers $7.00 corn. The bottom has actually been 3.02 on the December contract, but that is pretty ugly if the seed and fertilizer cost you so much that you spent $4.00 a bushel to grow it.

The market used a frost scare and a bullish USDA Supply and Demand Report to bounce to 3.47-3/4 a week ago, but that didn't last long. A frost scare requires frost eventually. We closed back at 3.16 yesterday, but have gained 3-1/2 overnight. November soybeans had a low of 8.92 on the 14^th, but was nearly 86 cents higher at one point the next day. The high did not hold, and we are now at 9.21.

Volatility in the markets gives opportunities some times, but the squirrel farmer and the 'possum farmer miss them.

The squirrel goes energetically to the market feeder with one eye out for something bad, but as he gets started nibbling, the ADD kicks in and forgets to pay attention to what is going on around him. Suddenly that lumbering oaf of a hundred-pound Lab who can't run as fast as the squirrel if he is paying attention, has chewed enough of him to get him in his mouth with only the feet and tail sticking out.

The marketing 'possum goes to the feeder tentatively, and at the first sign of trouble freezes in place. Unable to act, he loses his opportunity.

The little birds, meanwhile, nibble a little every day and thrive. No matter if the feeder is piled high or just has a few seeds in the corner, they do some regular marketing and don't worry . The market Lab can't bite them if they just do their job and don't hop onto the ground where they don't belong.

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

2009-09-15T09:54:00.001-04:00

Market Monitor

By Marlin Clark

Low prices, more demand

Two old axioms of the grain trade were being talked about this last week. One is that a big crop keeps getting bigger. The other is that the cure for low prices is low prices.

The market continues to talk about a huge crop, and USDA keeps confirming that, but demand is growing. Several reports from Uncle Sugar kept the chatter going in the pits in Chicago Friday and Monday. Principle interest was in the USDA Crop Production Report and the US and World Supply and Demand Reports.

One long trend of USDA reporting is that in big crop years, USDA reports bigger and bigger crops in successive reports. That would be true for this year, as Friday they reported a two percent increase in the corn crop from what they projected a month ago, to an even 13 billion bushels. If realized, that would be seven percent more corn than we produced last year. They expect an average yield of nearly 162 bpa.

At the same time USDA pointed us toward a record soybeans crop of 3.25 billion bushels, up one percent from last month and ten percent above the 2008 crop year. The average yield would be 42.3 bpa, the third-highest ever. Ohio is projected to tie the state record average yield. This is understandable driving around my area where the crop looks to be by far the best ever. It is not understandable if some anecdotal tales of poor podding are general and not just reports from isolated farms.

Key to the USDA reports if we are trying to make sales decisions is the brightest spot in the reports: USDA says we will have record demand for corn! The pundits from Uncle Sugar expect us to use 13.025 billion bushels of corn this crop year. In other words, we will more than use of the near-record crop. As a result, the carryout that was feared would near the two billion-bushel mark will actually come out 60 million bushels lower than the projection last year at this time. We are now looking at 1.635 billion bushels of carryout, the grain left in storage at the end of the crop year.

The increase in usage is a reflection of the idea that the cure for low prices is low prices. At the lowered prices we are now seeing, demand is increasing.

Key to that demand is usage for ethanol. For all the industry has been suffering and seeing major shake-out of some companies, ethanol usage of corn is projected at 4.2 billion bushels, up from 3.675 last year.

It remains to be seen if these reports are correct. It remains to be seen if the result is more than the firming of corn prices we have seen the last few days, or the start of a step up in prices. Overnight corn is up a nickel, and is at 3.23, 21 cents better than the contract low we put in just a week ago.

Friday USDA projected that demand this year would set a new record.

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

2009-09-08T09:48:00.001-04:00

Market Monitor

By Marlin Clark

While living in India as a student, I was tormented for awhile with a certain dream. I returned home to Cherry Valley after a year of wandering the world and the house I grew up in was gone. I could not find my parents.

The dreams stopped the day I realized the house was gone! I was remembering the house where it used to be. Dad moved it 900 feet east when Route 11 came through our farm. My dream was a mixture of reality and fantasy. My subconscious mind had not adjusted to the reality of the move.

I was experiencing what, in the modern age, we like to call a paradigm shift. The rules and circumstances had changed.

The grain business is in the middle of one of those shifts, and it is not pretty. The shift was to unlimited demand by the booming ethanol industry last year. The boom exploded prices until corn was worth over $7.00. The industry analysts talked like this was a shift that would forever change the landscape of agriculture. Corn acres increased sharply, resulting in exponential growth in input costs, limiting the profit growth for the producer.

That was then and this is now. Now we have ethanol plants bankrupted by those high corn prices, and sitting empty. Now we have the increased acres and good projected yields that have us with nearly a two billion-bushel carryover in corn coming. Now we have the high input costs to plant this crop that we cannot recover from the reduced prices as the new shift has us back to less demand.

December corn futures mad another new low on the Monday overnight, at 3.02.As recently as August 3^rd we were at 3.76. November soybeans touched 9.10 overnight, although they also traded at over 9.35. There is a lot of volatility, even in one day.

Harvest is close, and we should expect lower prices unless we are surprised by last-minute problems or yields. The real surprise though, would be conditions that would cause us to boom again. We are stuck with the shift in mood, the shift in conditions.

The house I grew up in is still there, in its new location. Mother rode along, playing the piano while it was moved. She is gone now, and Dad before her. The house went outside the family. I can't go home again. And, we can't go back to the markets of 2008.

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

2009-09-01T09:59:00.001-04:00

Market Monitor

By Marlin Clark

Harvest creeps closer

Time flies. The earth spins, the days come and go, and inexorably we creep toward harvest.

Many questions remain as we approach the end of the crop year. Not the least of these is, what size crop do we have? The government says it is huge, and recent revised USDA reports have traders back on their heels, trying to support prices.

The August 12^th USDA Crop Production Report put the corn at 12.761 bushels of estimated production this year. This is up a half-million bushels since the July report, and two thirds of a million higher than last year. It is also a coupla hundred thousand more bushels than the traders expected.

USDA now puts the soybeans at 3.199 billion bushels, a little less than the traders thought, and down 51 million from the July report.

But, try to find someone locally who believes these numbers! This has been the summer without summer. By my count, in Ashtabula County we had one day in August of 90 degrees, and that was for about 20 minutes before it slipped back into the eighties. The coffee break on the balcony in the morning requires a sweater. It just seems like we are ten degrees too cool on most days.

It was 43 degrees when I walked the dogs this morning. That seems a little cool for the first day of September, and it gets me thinking what a lot of farmers are thinking: should we worry about an early frost?

I am not walking the fields, so I am not sure just how far along the corn is, but it seems like we are late. A morning this cool makes me think that we are not that far from too cool, and it is only the start of September.

Now, farmers like to worry, and nothing will likely happen. Still, is seems like maybe the market should be building a little fear into prices. So far that is not happening. Over night we were down again, and prices are terrible compared to the cost of inputs. Of course, historically these are still good prices, and the market does not care what your cost of production is.

December corn futures dropped to 3.11-1/2 on the 17^th, then gained 26 cents by the 25^th. 17 cents were gone again in the next week. We closed the month of August at 3.20-1/4, about $2.70 new crop cast.

Beans had a high in the middle of the month at 10.66 Novembe3r futures, but were only 9.40-1/2 by the 19^th. Monday beans had a 51-1/2-cent range, and closed at 9.67-1/4. That is up off the low, but not what we would like.

The Chicago wheat futures have exhibited a steady downtrend, losing nearly $2.50 since June. We closed December futures Monday at 4.98-34, 18 cents better than the low during the day.

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

2009-08-11T09:58:00.001-04:00

Market Monitor

By Marlin Clark

Poised for a pop

Grain markets are uneasy and volatile ahead of new numbers from USDA Wednesday.

USDA will release the Supply and Demand Report Wednesday, and, as usual, it represents an untimely truth for the grain market columnist. I write this on Monday before the market opens, and the reader gets this on Thursday, after the report and after some market reaction to it.

Monday The markets were sharply mixed, with corn up four cents, but soybeans down 28-1/2 on the November contract. September wheat was up nearly five cents.

Overnight the mood changed in the electronic bean trading. Soybeans got back 17-1/4 cents, much of the Monday loss. Corn continued higher, up most of another four cents, and wheat was up over four cents.

For perspective, the corn market has taken a beating lately, but the beans had been on a rebound. December corn futures had a high in early June, the dark ages now, at 4.73-1/2. Of course at that time the magic number for forward selling seemed to be much higher. We broke over $1.50 to 3.14-3/4 in late July. In ten sessions, however, we put 61 cents back on, then lost 55 cents in the next week. That more or less defines volatility!

Currently the overnight is up near 3.30 December, a bounce off the low. Trading is likely to be slow during this one day anticipation, but anything can happen. The traders now say they are looking for the Supply and Demand Report to show a decrease in the old crop carryover to 1.748 billion bushels from the 1.77 shown last month. No big deal. The bigger deal is the expected new crop carryover, what is left over August 31^st 2010, to 1.7 billion bushels. That is up from the 1.55 billion in the last report. Keep in mind that we consider the level where supply gets "tight" at an even one billion bushels.

This comes primarily from a crop of 12.5 billion bushels instead of the last estimate of 12.29 billion. It should interest the reader that while the farmers are talking about the coldest summer on record and lack of heat units to make corn yields, the pros are talking about no yield-limiting heat spells and a huge crop.

The average trade guess for beans is a different matter. There most are looking for a smaller crop, and a smaller carryout. They also look for the old crop carryout to get smaller. That is what we have left right now.

The average guess is for soybean production is 3.225 billion bushels , down from the 3.26 estimate in July. They expect USDA to estimate an old-crop carryout of only 104 million bushels instead of 110 in the July report. The new crop is now estimated by traders at 212 million bushels instead of the 250 in the July report.

The case could be made that the report should be bearish for corn and bullish for beans. If fact, we have been sharply lower in corn and higher in beans recently, so that may not be true. I lean toward the idea that we will get a quick knee-jerk reaction, that is bearish for corn and not beans, then we will go back to trading the recent trend. That is, if the USDA agrees with the traders, the report is already in the market. A surprise will make us all cranky.

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

2009-07-28T09:32:00.001-04:00

Market Monitor

By Marlin Clark

Corn leads grain markets higher

For the first time in a long time, corn has had days as the leading grain on the Chicago Board of Trade. That is to say, some days the gains in corn were more than the gains in wheat or soybeans. Some days the beans matched the corn, but with a higher-priced commodity where the gain was not as great a percentage of the price. In the process, corn has bounced 20 cents off the bottom created when USDA "found" three million acres more planted corn.

That is the good news. The bad news is that December corn futures are still under 3.35 after a high over 4.73 in early June. That high marked a technical retracement to the high or 4.71-3/4 made the first trading day of the year. So, we are more than a dollar and 35 cents off the high, and there is nothing on the horizon to made us think we are going back there.

The current price is a shock to the farmers that are still paying off input costs that were run up in the acreage rally fed by ethanol demand. As fertilizer and seed increased exponentially in price, we had one good year to sell corn, and that was marked by grain companies that were limited by margin requirements in forward contracting. So, the good prices did not get locked in, but the high inputs are still hanging around.
I ran into Doug Stiles of Western Reserve in Andover recently. He and I shared office space in the ancient past when we both worked in Jefferson. I asked him, "Doug, am I crazy, or do I remember buying $62 potash?" He agreed that was the price back in what now seems like the dark ages.

When farmers call these days, it is to talk about how cool it has been and to sell a little corn they wish they had sold earlier. The cool weather is becoming the talk of the Midwest, with something like 3000 reporting stations in the US reporting the lowest average temperature on record. You will notice that the climate talkers are now talking about climate change and not global warming. Now any variation from the norm is our fault.

It is noteworthy that corn progress is not much behind normal locally, even given the cool weather. I credit the warm May for this. I can remember planting corn in the end of April and not seeing it until the first of June. This year it was knee high the first of June. It has just been slow since then. It has been slow to grow out of the hail damage we had locally a month ago near Rt. 11 and Rt. 322 in Southern Ashtabula County. Millers' corn is growing out of it and is not showing the damage, although it will show in the bin. Coltmans' corn was not hit as hard, and it is looking almost normal. The beans are another issue. Bob Wood's beans are not growing out of the damage, and Millers' may never fill the rows out. It is ugly to watch.

We are near August now. If we fire up some heat we will have good crops. If we stay cool, the crops will be smaller, though not as much as one would think. The lack of heat is eliminating the acres that are hurt by hot weather nearly every year, so the average is not lowered as much as one might expect. The market will start to get sensitive to weather in September. The agronomists will be walking fields looking for black layer. Traders will worry about an early frost to hurt the late corn.

The market is a disappointment, but the biggest disappointment is always a small crop. Cross your fingers.

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

2009-07-14T09:44:00.001-04:00

Market Monitor

By Marlin Clark

Small green apples

In one of the Zane Grey novels I poured over in my youth (as an adult I stick to Louis Lamour), one of the cowboy characters would declare on special occasions, "Thank God for small green apples!" The thought was that whatever had happened was not a great thing, but it was at least positive. How positive depends upon your taste for those small green apples.

I think of that this Tuesday morning as I look at the overnight trading on the Chicago Board of Trade. September corn futures are up four cents and November beans are up nearly six. Wow! Corn futures have dropped $1.40 and soybeans have dropped $2.00 in a month. Maybe this is Turnaround Tuesday!

Yes, there is a little sarcasm there, but when the turn comes we will look at a trade like this and say it started here. Maybe this is it! Thank God for small green apples!

The slide started the first week of June as the weather worries went out of the market. The late planting seemed to be less of a factor when the crop actually got planted and the sun shone. As the slide seemed to slow down we hit the June 1 USDA Grain Stocks reports that said we had a lot more corn and beans than the trade had been figuring on.

USDA reported just over 87 million acres of corn, that was two million more than the March 31^st Planting Intentions Report and three million acres more corn planted than the average trade guess. USDA report soybeans planted on 77.44 million acres. That was 154,000 more than the Planting Intentions number, but it was half a million under the average trade guess.

It makes sense that the corn plunged on more acres, although it is interesting that beans plunged even though the trade was supposedly looking for more acres. Corn dominated the thinking, and the markets have been ugly.

So, when we have a market like Monday where September corn futures hit near 3.20, then came back to close at near 3.32, we can get excited about the overnight being higher. We are now 15 cents off yesterday's low, and we hope that means something. Hope is all we have right now. At the same time, November beans hit a low of 8.92-1/2 Monday, and are now at 9.17-1/4. That is nearly a 25-cent bounce. A positive trading day today will give us some breathing room.

So, say this little break in the downward move holds. Then what are we looking for? I don't know. I worry that farmers will shoot for the moon betting on a summer rally. The advice letters all say sell the basis and bet on another rally. That is fine, but is the rally for 20 cents or a buck? Any real move requires a reason. Right now the only one we have is that the prices got so low that the specs are looking for a reason or an excuse to get back in.

What is the technical or fundamental excuse they need? Weather is a little cool? The stock market rallies? A hot and dry August burns up the beans? As usual, most of the things that could help prices we really don't want to happen.

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

2009-06-30T10:13:00.001-04:00

Market Monitor

By Marlin Clark

Hoping for a hat rack market

I have to admit I love to coin names for market moves. You have seen a lot of weird ones in this space. None of them have ever caught on generally, as far as I know.

This morning the effort is the "hat rack" market. That is where we are right now, as we look for some kind of market news to "hang our hat on." You know what I mean. There must be some piece of news that will turn this market around.

Maybe the news will be in the USDA Supply and Demand Report. Maybe it will be in the Crop Production Report, out in two weeks. Maybe it will relate to the weather. Shall we bet on too wet or too dry? Just hope the bad weather is for the other guy.

Bad weather has hit PA the last few weeks in the form of torrential rains. A few days ago Jon Hart in our Mifflintown office was bemoaning the assumed damage in the wheat crop there, with ten inches of rain. That rain pattern has not improved, and it did not improve his attitude when I told him we had been dry and needed the rain we were getting. One man's trash is another man's treasure.

Prices have plummeted the last few weeks, with last week being mostly a market in a holding pattern looking for news. The calendar page is moving to July. We spent June worrying about the crops being late. We normally spend July worrying about being too dry. The traders need to be worried to drive prices higher, and we are struggling to find worries. The market is not concerned with the wheat crop in PA any more than it lies sleepless worrying about crop problems in NE Ohio. We are not a big factor.

General rains are delaying the Plains wheat harvest, however, and that becomes a factor. It has not shown up in the markets yet, as the wheat where the harvest is not is still enjoying one last drink to fill berries.

It was the speculators that ran the prices up in April and May, and they have fled the market, leading to the decline. They are fickle, looking for a short-term profit. They can jump in just as fast as they dropped out, but they need a reason.

Overnight prices are higher on the Chicago Board of Trade. There should be a reason, but the best I can come up with is the trend to a "turn-around Tuesday." It is common after a down week to change prices on Tuesday. September corn that was down seven cents Monday is up three on the overnight trading. July soybeans were up 14 yesterday, but most of the day the November beans that we are focusing on were down seven. That is because this is an old-crop rally, pulling along the new. The rope pulling the new got broken by the pull of good crops in the ground.

Chicago wheat futures were down Monday, but are up overnight. The hard wheat harvest has been going for nearly two months. The soft is starting. Prices will normally decline in harvest unless the harvest is disappointing. If rains degrade the quality yield of the crop that will change.

Locally it seems the Millers' Ammonia crowd has been working overtime, and most of the N is on. The rain has stopped the field work, and most of the corn is too high now for side dressing anyway. Several Wayne Township farmers did not like the weather Thursday night. Hail did drastic damage to hundreds of acres of crops near Rt 11 and Rt. 322.

Personally, Monday was a great day in Ashtabula County with Squeeze and me celebrating our 35^th anniversary. Dinner was at the Welshfield Inn, but I did not drive two miles south to visit Rick Briggs's farm while I was there. I thought about it, but I have learned something in the last few decades with Squeeze.

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

2009-06-23T09:37:00.001-04:00

Market Monitor

By Marlin Clark

Big crops, big disappointment

Prices have broken sharply on the Chicago Board of Trade the last few days. The perception of a good crop and outside markets continue to ravage what was a welcome rally.

Monday trading was an example of how bad it gets when the speculators run out on the market. Soybeans were down 27-1/2 cents nearby and down 25 cents in the new crop. In the process they broke the perceived support line of around 9.75 November futures. USDA reported soybean planting at 91 percent for the country in the Monday report, ahead of normal and last year. That last market checkpoint has not been passed, and we will see no support from delayed planting, even with the rain that will continue to delay the last acres.

July corn futures lost 14 cents, and closed just above the support line. July wheat futures lost most of a dime, even as traders are talking up possible disease problems in the Chicago soft red crop because of heavy rains.

The rallies of the last two months have been fueled by speculators adding to positions as they expressed concern with late planting of corn and weather problems in general. When the dry weather returned and planting caught up, the mood switched to fears of dry weather. Now, most of the Midwest has too much rain. That is a worry for wheat, but traders see it as being good for corn and beans. "Rain makes grain" is the cry in the pits, and until the rain reaches the near-Biblical proportions of 1993 (is that the right year?) that cry will continue.

That the rain is a problem for wheat is the talk now. The area around our Mifflintown, PA office has had ten inches of rain in the last few days. It comes at just the wrong time for wheat and may promote scab disease to a nasty level. Jon Hart, our trader there, is worried some areas will have yields cut in half.

The question will linger for a couple of weeks here how widespread the damage is. Will Ohio, the largest soft red winter wheat state, see significant damage, or have they just had enough rain to fill out the wheat? What will be the difference from southern Ohio to the north, with the change in maturity? The exact state of growth when the rains hit is the critical matter.

Looking at the prices, we see wheat futures on the CBoT have had a steady downturn since the first of June. The July futures high was 6.77, and we hit recent low overnight this morning at 5.41. That is down $1.36 in three weeks. A lot of this would be a seasonal loss, as we are in harvest in the hard wheat country. So far there is no recovery based on scab damage.

July corn futures exhibit the volatility that has farmers discouraged. Those who were waiting with the last bushels for $5 are now begging me for $4, and I am 3.75!

July futures hit the recent low of 3.70 the end of April. It was a slow climb, pulled by beans and delayed planting, to the 4.50 high of early June. In the next three weeks we lost 70 cents, hitting the low Monday. Overnight we have bounced a nickel.

The July soybeans have led the inverted (early months higher than deferred) market. With only two brief dips, the beans gained $4.50 from early March to the June 11 high of 12.91-1/4. Since then we have broken the price $1.41-1/4 to the Monday low. We traded 14 cents off the low in the overnight.

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

2009-06-16T10:09:00.001-04:00

Market Monitor

By Marlin Clark

Scoping the whazzuupp market

Prices have crashed on the Chicago Board of Trade the last few days. Especially on Friday and Monday we saw huge declines in corn and bean prices, and analysts have plenty of reasons why.

Pardon me for being cynical, but it was no surprise that the remarks published after the cruddy markets Monday were mostly about "outside markets." When you are fishing for reasons for a decline, blaming it on the other guys' trading is always a good way out. It may even be right.

The term "outside market" refers to anything traded that is not agricultural. This can be the stock market, the financials, or non-ag commodities such as metals and oil.

Monday afternoon the talk was about the U.S. dollar being up nearly one percent and the stock market being down. The dollar is a big factor, as it makes our grain more expensive, priced in dollars overseas. The stock market is a reflection of the economic mood of the country, and down is mostly bad.

Add to this the magic word "Obama," as the President was poised to release his vision of a revamped financial market on Wednesday. This creates uncertainty in the outside markets, and uncertainty today meant cheaper grain.

On the fundamental front, the weather was seen to be becoming a non-factor, normal pattern. Crop conditions were improving over the Midwest. So, better crops, worse prices, a lessening of the production uncertainty that makes grain prices go up.

Successful traders are market followers, and market followers look for answers in those modern chicken entrails, our charts. The charts are ugly after Friday and Monday.

Corn, soybeans, and wheat all show a major turnaround from the bullishness of the last three months. It may be significant that the seasonal rallies in spring grains tend to run out in mid-June. The farmers think it is July 4^th, but that is only when the bad weather continues. We always have some kind of weather rally, and this one has stalled from lack of bad weather.

July corn futures lost 35 cents in two days. The recent high of 4.50, reached several days the first of the month, has become the recent low of 4.05-1/2 on Monday, with a rebound to 4.10 overnight going into Tuesday.

July soybeans gained over $3.00 in six weeks, to a recent high of 12.91-1/4 on Thursday. It never had a downturn in that time.. It gained $4.50 in two months. Now, we have broken below $12.00, and bounced back to 12.14 overnight.

July wheat futures are reacting to wet weather delaying harvest, but still have lost over a dollar after gaining $1.64 in tow months. July Chicago wheat futures are currently 5.81-1/2 overnight after an excursion to 6.77 June 1.

It is too late to say the weather market is over, but profit taking to changing that old rally of mine.

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

2009-06-02T10:08:00.001-04:00

Market Monitor

By Marlin Clark

New highs, same whys

Corn, beans and wheat have made new recent highs on the Chicago Board of Trade this week, but there is no surprise. The same factors that have pushed prices the last month continue to effect the ideas in Chicago of price discovery.

Price discovery is the term the grain trade uses for finding the right price in the right time period for grain. By running a grain auction continuously, the CBoT does not set the price, it discovers what the market thinks the price should be. This is not just semantics, it is a striking distinction, especially for those (mostly farmers) who think the Board controls things.

This has been a soybean rally. Good exports and the fear of actually running out of beans has the processor markets bidding up basis and the Chicago Board running up prices. This has been in spite of delayed corn plantings that could auger a switch of some acres to beans.

The numbers from USDA show that we have mostly caught up the corn plantings, although we are will past optimum dates for best yields. Now the focus is actually on slow bean planting in critical states that may cut yields.

At the same time the market has focused on soybeans, corn has rallied on the delayed planting, and on the bootstrap effect of the soybean rally. At this point, the corn rally should be expected to lose steam and just go along for the ride.

Wheat, meanwhile, has some yield issues, with delayed harvest from rain in the Southern Plains and delayed planting of spring wheat in the Northern Plains.

Let's look at the numbers. USDA as of Sunday night had the US at 93 percent planted for corn. That was up from 82 percent the week before, and right at last year's 94. It is a little behind the five-year average of 97 percent.

Within those numbers, Ohio was at 97 percent, right on the average, up from 76 last week, and above the 93 of last year. Indiana and Illinois remain the problem. They gained significantly over last week to 78 for Indiana and 82 for Illinois. They should be done.

Those two states are far behind in bean planting, and that is pulling down the overall numbers. The US is at 66 percent soybean planted, versus a normal 79. Ohio is at 84, just above the 83 percent average. Indiana is at only 50, and Illinois is an amazing 34 percent planted.

MI, after an awful start I detailed two weeks ago, is now caught up on corn and close on beans.

On the Board, the new highs were 4.45-3/4 for July corn, 12.27 for July soybeans, and 6.77 for July wheat. All three of those are lower on the Monday/Tuesday overnight.

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

2009-05-26T17:11:00.001-04:00

Market Monitor

By Marlin Clark

The quick trip from cry to dry

Most of the spring the talk has been about how wet it has been. Farmers have been struggling to plant crops between the raindrops. There were some close-your-eyes days when the ground got worked wet because the forecast was for wetter.

Now is the spring of our discontent. Now we are starting to talk about how dry it has gotten. Now we are wishing we had not poked seed into mud that might crust over it. Now we are remembering the year we planted 80 acres of beans behind Dad's house when he was adamant that it was two days too early. Well, at least I am remembering it. The beans crusted over and we hit the field with a rotary hoe twice trying to get some plants through the ground. Dad was never much for "I told you so," but the beans put out 35 bpa and I got a lesson in patience.

Last night Squeeze and I returned from a day of wandering to finish celebrating her "birthweekend." (Birthday is not enough!). As we turned in the drive, she asked if her white lilac had ever bloomed, so I just turned left and drove her by it. We ended up taking a crop tour of the yard, checking out the late-budding trees and some new plantings in our little arboretum. The lawn that I was churning holes in with my ZTR mower last week is bone dry this week. I could not hurt it, even with my All-American land yacht.

It was a nice drive. I mow six acres, which is my way of downsizing from 1200 acres of farming.

So, if it is dry, is the party over? The Board crashed overnight, with corn down seven and beans down nearly ten cents. But, that might just be a reaction to the gains going into the long weekend. It feels like the crop is still late, and we will know more this afternoon. There are several more days of rain in the forecast, though we are sneaking through with overcast and no rain right now.

And, even if we dry off and finish planting in the west, continued dry weather would just change the focus of a continued weather market. We can focus on damage from lack of rain, which is the favorite game on the Chicago Board of Trade. Nothing gets the attention of the guys in the pits and (these day) at their computer trading terminals as a good dry spell.

A look at the charts shows gains in beans that are surprising, and gains in corn more than make sense. July soybean futures have gained nearly $3.50 since early March. The high was on last Wednesday at 11.89-1/2, but we have slid 33 cents off that since.

July corn futures gained nearly 65 cents from the end of April to last Wednesday. We hit at or near the same high four times, which is a sign of a top. We have lost11-1/2 cents off the high to the overnight close on this Tuesday morning.

July wheat futures have rallied into the harvest, a common phenomenon for wheat. We hit the same low on the Chicago Board of Trade three times, on March 3^rd, March 20^th, and April 20^th. Since then we have rallied from 5.10 to almost 6.20 on the overnight this morning. The last leg is being pushed by wet weather that is holding up the harvest in the Southern Plains.

All this means that, as usual, there is a lot of price activity this time of year. There may be more. If the crop gets finished and normal rains come back, the prices will decline. Don't miss this opportunity, but beware of more to come in June.

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

2009-05-19T09:59:00.001-04:00

Market Monitor

By Marlin Clark

Crop Tour is Ugly

I put in 750 miles in Ohio and Michigan over the weekend, and I was amazed how far behind we are in reality. Yes, the Planting Progress Report from USDA said that Ohio, Indiana, and Illinois are the problem with the U.S. being so far behind, but looking at miles of Northwest Ohio bare as far as the eye can see, which is several miles in the Black Swamp area, was startling.

Sunday I drove east from Maumee and didn't see a field planted until I got to the Ottawa County line. Even the light soils south of Castalia only had some fields planted. It was then I remembered that going out Friday, I only saw three tractors moving between Cherry Valley, Oh and Dundee, MI. None of them was bringing up dust.

We were going to a nephew's graduation at Spring Arbor College, which of course means you stay overnight in Dundee. That left Squeeze two hours at Silver Bell Christmas shop and two hours for me at Cabela's. Sure, I am willing to drive that far for a graduation—just let me stop at Cabela's! (I resisted the $10,000 shot gun and bought a belt and a laser boresighter. You can tell how the grain business is going by how much I buy here.

Actually, business has gotten busy as corn got above the magic $4.00 mark. We dropped back, then went through it again. Meanwhile, the soybeans are making new highs right through the Sunday-Monday overnight session. July futures hit 11.61 overnight, even with talk about switching acres to beans.

Exports are driving the beans right now, as the market ignores the unknown acre change and looks at a weekly export of 15.7 million bushels, when they expected 10 to 14, We only needed 12.9 million bushels to maintain the projected pace, so we remain ahead and gaining.

This is the week when the acres come into question, as now we are into reduced yields from delayed corn planting. The country as a whole is only 62 percent planted, up from 48 last week, but well off the 85 percent average. Even the slow pace of last year had us at 70 percent. Last year we still raised a big crop. This year it is getting smaller. Ohio is at 39, up from 22 last week. We should be in the 80's. Indiana and Illinois are in the 20's, and should be nearly done. Michigan (I don't give a darn, but the stats matter) has doubled acres planted to 41 this week, half of normal.

The market was defensive Monday, with good weather for the week projected. Corn was sharply lower overnight, but traded up four cents by the close. The reality is that the wet areas need this week to dry, and wet weather is returning next week. Ohio will get a lot in this week, but PA and Illinois will get dried out just in time for more rain.

So, this is a critical week for marketing, but more critical for planting.

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

2009-05-12T10:07:00.001-04:00

Market Monitor

By Marlin Clark

One-day age of Aquarius

The planets are aligning this morning in a manner that will be easier to interpret by the end of the day. Unfortunately, I have to write this on Tuesday morning, not Tuesday evening.

The planets are aligning, or even colliding, in the form of the USDA Planting Progress Report, out Monday afternoon, and the USDA Supply and Demand Reports, out before the open today. All make interesting reading, and all indicate another bounce in this bullish market.

I have said that the market had run out of steam and needed more fundamental news to sustain it. That would happen if we continued a slow pace of planting, I have told callers. Now, that is true, and there is more news besides.

The USDA US and World Supply and Demand Reports out this morning indicate a drawdown of supplies and point to higher prices. The grain trade was expecting a 1.71 billion-bushel carryout in corn at the end of this year. It got an estimate of 1.6 billion. That is not a lot, but it is in the right direction. It is also below the lowest trade guess of 1.645 billion. The soybeans came in as expected, at 130 million bushels. The significance there was not that it was not a surprise, but that it was 35 million below the April estimate.

The Planting Progress Report contains the immediate market-making news. However, the least surprise is in this report, as the market has been trading delayed planting for several days. This would be the reason why the bullish enthusiasm in the market recently had changed clothes. The last few days corn has gained at times when beans were lower. This is a reversal of a market that has been led by the beans, ever since the March 31^st acreage surprise. At that time we found out the corn acres would stay closer to last year instead of declining, and that we would plant several million acres fewer beans.

Now it remains to be seen if the acreage projections are correct. Corn planting in the country, led by the East, is sadly behind normal. In addition, there is disagreement as to how fast we catch up. Some forecasters think the wet patterns will hold us back this week and next. Some have stirred the chicken entrails and see clearing and a catch-up of planting. You roll the dice on this one.

What were the numbers? The U.S. as a whole, which is represented by the 18 major corn states, is behind 23 percent compared to the five-year average. We normally plant 71 percent of the crop by this time, but are at 48 percent. Last year we were also slow, and still raised a huge crop, however. This time last year we were also at 48 percent. That is the good news.

The bad news is that last year Ohio was similar to the country as a whole, but this year we are one of the laggards. Ohio as of Sunday was at 22 percent planted, up from 13 last week. We have a normal average of 68 percent, so are less than a third of normal planted. Indiana and Illinois are even further behind, and they are two of the four largest states for acres. Indiana is 11 percent planted, and Illinois is only ten percent done.

The soybeans are a similar situation. The U.S. is 14 percent planted, with 25 being normal. Ohio is at 13, but we normally are 37 percent planted.

Historically, even though we got away with it last year, this is the week that late planting starts to hurt yields. In Ohio the best yields come when we are done the first week of May. You can argue that the magic day is maybe the tenth or after for Northern Ohio.

Regardless, the late planting adds an immediate bullish factor to the bullish supply situation. The next week will make critical differences for the crop and the markets.

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

2009-04-28T10:19:00.001-04:00

Market Monitor 415

By Marlin Clark

Blame it on the Bassa Nova

Every once in awhile something happens in the grain markets that finds me frozen in amongst tearing my hair out, laughing, or crying. That was me at 7: 30 Monday morning when I looked at the overnight trading from the Chicago Board of Trade and saw beans down forty-something, corn down 12, and wheat down 16 cents.

It wasn't the prices—we have gotten used to the volatility the last couple of years. It was the reason given—swine flu. You've got to be kidding! Makes as much sense as blaming it on the Bassa Nova, if you remember that old song.

I remember swine flu. I had it fall quarter of 1968 at Ohio State and missed a history final. I am not sure about the year, but I am about the final. I was too sick to get out of bed, but not as sick as I was when I saw the grade from the make-up exam. Those profs have no sense of humor about having to go the extra mile, and the makeup always costs you a grade.

Oh yeah—I also remember that I did not get swine flu from pig.

This is the reasoning, if you can call it that, for May corn futures down to 3.67 and May beans bottoming at 9.90 overnight Monday. The "swine" in the swine flu would get people to buy less pork, cutting demand for corn and soybean meal. You can't make this stuff up.

Now, I heard Dr. Bernadette Healy tell Bill O'Reilly last night how you really get swine flu, and it has nothing to do with swine. To paraphrase my favorite third-grade joke, some people think it's swine, but it'snot! (Is that word in the style manual, Miss Susan?) She put it in a more-socially acceptable manner, but the answer was still the same. Some of the stuff in a sick person's nose ends up in yours. Use your imagination how this comes about, but it probably has nothing to do with the last time you kissed a pig unless that pig was an ugly girl friend with a stuffy nose. That actually reminds me of my favorite sixth-grade joke, but I will show some discretion. Darn little discretion, but it is there, nevertheless.

The silly season on the Chicago Board of Trade did not last long. During the day we traded beans down 22 cents or so. We actually closed down 35-1/2, at 10.04-3/4 though, so it was a sick (I couldn't resist) day. May corn ended up down most of a nickel.

The overnight Monday-Tuesday is mixed. Corn is down another 2-3/4 cents at 3.69-1/2, but the beans are up most of a dime, and the wheat is back up over a nickel after a 24-cent loss from the silliness yesterday.

The real problem is, the market is not silly. Prices actually did decline as a guess as to the reaction of a silly consumer. That is a different matter. And, the fact that it could decline this easily is an indicator of how weak it is. May corn futures are now 47 cents below the recent high, back to the same low we made a week ago. May beans have now lost 89 cents of the 2.35 gain made between the first of March and the middle of April. The wheat is bouncing along now on the same low it has made three other times since early March.

BTW--If you just have to hear the best third-grade joke, give me a call. If you actually sell corn on this break, I will throw in my eighth-grade joke, too. Or, I may save it for another time I am desperate for a column.

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

2009-04-23T16:18:00.001-04:00

Market Moment for 4/23/09

By Marlin Clark

Remember today. Today the bean rally faltered, but the corn gained. Today represents a change of mood.

Since the USDA Planting Intentions Report nearly a month ago we have had a strong bean rally and a corn market that went along for the ride. Last week the corn could not even ride the bean coattails and fell off 47 cents from the futures high. Now, in four days this week we have got 21-1/4 cents back from the Monday 3.60-1/2 May futures low.

So, today, Thursday, we gained 7/1/2 cents on the May corn and lost over eight cents on the May soybeans. Why? Planting delays, or fears of planting delays. Fears that the corn acres get smaller and the soybean acres grow.

Take this one to the bank fast. While sources are telling us the corn is going in fast out west, the market is still reacting to the Monday afternoon USDA Planting Progress Report that says we are behind in corn planting. Maybe we are, maybe we are not.

Corn Crashes, beans hang on--4/21/09

2009-04-21T13:01:00.001-04:00

Corn prices crashed on the Chicago Board of Trade the last week, even as soybeans tried to hang on to recent highs.
Last week I made the case that this was, after all, a bean rally. The corn was being dragged along, and corn prices were showing signs of faltering.
That view was confirmed this week with a major decline in corn prices that demonstrates a severe divergence between the two commodities. Ever since the March 31st USDA Planting Intentions Report, the fundamentals have been pointing toward better bean prices and worse corn prices. In fact, corn did go higher for a time. That time is over.
Cash corn prices locally have declined about 60 cents in April, with most of that in the last ten days. At one point Monday we hit 3.60-1/2 on the May futures, 47 cents below the April 2nd high. We traded above $4.00 May futures eight days in a row while the soybeans were gaining $1.76 in less than three weeks. We lost a third of that soybeans gain in the last two days, to a 10.12 low overnight Monday, but are now at 10.22 before the Tuesday open.
In addition to the futures losses, basis has widened 10 to 15 cents as there is very little local demand for corn. The futures loss of 47 plus 13 cents or so basis decline is a 60-cent cash change in price.
I have been turning down several trucks a day for a month because the feed mills in Central PA are jammed. At the same time, the farmer attitude is that they will think about selling cash corn at 4.25 to 4.50. Unless there is a major fundamental change, this is unrealistic.
What is the next fundamental change? Well, we are already talking about delayed planting. Locally we had a dry spell in March, and have seen ground stirred off and on since then. Now we are stopped by rain again, with more rain forecast.
The fear of delayed planting got some initial strength yesterday. The first USDA Planting Progress Report was released Monday after the close. The trade was hoping to find ten percent of the corn in the ground. It got just five percent, when 14 percent is the five-year average. Last year we had four percent at this time, and went on to make a huge crop.
A 20-cent or so break in bean prices Friday might have been a weekend profit taking move, or might have been a reaction to the Dow declines of the week, after six weeks of positive Dow action. Since the beans have been trying to support the corn prices, the bean decline made it easy for the corn to make new recent lows.
Overnight Monday/Tuesday we have recovered modestly on corn and beans. Maybe we have put the lows in again on the delayed planting. Bullish export news is helping. Mondays export report from USDA is pointing toward record soybean exports.

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

Spring has sprung the bean prices--4/14/09

2009-04-14T13:04:00.000-04:00

I’m sure we all remember that immortal poem. You remember the one—you learned it just after “roses are red.” It came to me as I walked the dog this morning. “Spring is sprung, the grass has riz, I wonder where the flowers is.”
Maybe not Wordsworth or Longfellow, but it fits the season. My Persian Lilac is showing green buds. My earliest maple tree is budding. There is a vase on the coffee table with three kinds of daffodils. I like the ones with the orange centers best, but that might just be the Ulster Scot heritage showing.
Wheat fields have turned green, and the lawn is not far behind. The wheat is prettier, because it is the first harbinger of spring here in snow country, and it doesn’t make me think of work I need to do. My mover has come back from Fred Shohayda’s shop ready to go and is sitting under the Ohio State grill cover, waiting.
The snow melts, and we have a monochromatic landscape except for the wheat. Grain markets have been monochromatic since the March 31st USDA Planting Intentions Report. This has been a soybean rally, primarily, and the last week in corn futures has reminded us that corn has just been along for the ride.
Monday was a good example of that, and the overnight into Tuesday has reinforced that attitude. The beans are trading on their own now, and the corn is staggering. Monday the March soybean futures got back to the new recent high of 10.30, repeating the April 9th high. That is now $1.33 above the low trade the day before the report, quite a move! It is nearly $2 above the recent low of 8.38-1/4 just back on March 2nd. It is also getting close to the congestion point on the chart back in January in the 10.40’s, with the high of 10.69 very briefly on January 12th. That came from a reaction to the USDA Inventory Report.
The soybean surprise from March 31 was that we were going to plant several million acres fewer soybeans than the trade had anticipated. At the same time, we were only going to cut corn acres one million instead of the three million a lot of traders anticipated. The main surprise was that bean number. The secondary surprise was that the corn still went higher, following the beans.
March corn futures made the recent low on March 2nd at 3.44-1/2, then bounced to 4.03-3/4 by the 23rd. Anticipating bad news, the traders took the March to a low of 3.76-3/4 the day before the report. On report day we zoomed to 4.06, then made a recent high of 4.07-1/2 on April 2nd. That was a 63-cent gain in exactly a month.
March corn traded eight consecutive days above $4, but that is over. Monday we made a low at 3.83. Now comes the time when we have to decide what corn is really worth. The more times it trades at the same level, just above $4, the harder the ceiling on the charts becomes, and this is starting to feel like a hard ceiling.
You can always tell when the top is in. That is when the farmers all move their targets higher!
And, just to add insult to injury, the hardest job this spring is not buying corn. It is finding a home for it. I have turned down 40 trucks in the last two weeks just because the homes are all staying full of local farmer corn in Central Pa.
Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.

Bulls on Notice

2009-04-11T07:57:00.001-04:00

On Thursday morning, the USDA's Crop Production report was the center piece of the trade. The report had nothing really negative but the market acted as if they information was already discounted. The highs of the session were very early and the market closed on its lows, not a pretty picture. Beware of a market that does not go up on bullish news. Ending stocks in wheat were lowered 16 million bushels to 696 million bushels, but are still over twice as large as last year's ending stocks of 306 million. This is in my opinion why we have had trouble rallying the wheat market on the frost scare. There is just too much wheat around in the US and the World for that matter for the trade to get too concerned with a potential 35-50 million bushel loss.

The report showed ending stocks of corn to be very adequate @ 1.7 billion bushels. This was a small reduction from last month's report so again a friendly number but not a surprise. Unfortunately, the corn market did have an outside reversal and closed near the lows. An outside reversal is a technical term describing a market that has a higher high than the previous day and closes on a lower low. We reversed off the resistance @ 4.05 that we just could not seem to penetrate. Corn closed off 14 cents on the week and ended on a sour note. This does not alter my view that is as readers know not crazy bullish but constructive. The corn market would have to close below 3.80 to turn shift the pattern down. I believe that the market will consolidate and be supported on this break. For the traders among, if the market gives us a chance to buy weakness on Monday, it is worth a shot to buy May with a tight stop @ 3.80. I do not think the bears can pin the corn market until the farmers get the corn seeds in the soil. We are pretty wet most places and cold. Probably two weeks of good weather is needed in the west to get the soil temps up and the soil stable enough to go farming. So far it has been too early to get excited; however, the weather must start to turn more friendly or the market will become agitated and nervous.

The cash corn market in PA is very well supplied. Across the country, farmers are holding fairly large supplies of corn and the buyers seem to understand. Demand is off; remember that 2Q corn demand was the 2^nd weakest in 7 years. I do not see much here to comment on except that farmers should be selling or actively discussing a marketing agenda. (With Keystone Commodities of course) If we get the corn planted and off to a good start which right now seems miles away the market will feel cornered with adequate supplies and a big crop on the way. Right now, farmers should be 75-80 sold for old crop. Wait to make additional sales on a breakout above this pesky 4.05 ck9/ 4.35 cz9 area.

USDA cut ending stocks in beans to 165 million, down from the prior month. 165 million is a very tight carryover and suggests that soybean market will remain backwardated ( nearby premium to deferred futures prices) The research that I read suggest further cuts to come as sales today are 90% of the total USDA projection and we remain competitive with SA. The soybean market opened up very strong posting the highs of the session early, but closed on the lows. We did not have an outside reversal as we did in corn, but the market was unable to extend on the bullish news. Hear scuttle about prolonged wet will force more acres in beans. While true, that is not the driver. Tight stocks are the story in beans and meal, not next years ending stocks. In fact, 09/10 US ending stocks will nearly triple on a good yield assuming the USDA's acreage guess from 3/31 is accurate. My broker, The Linn Group is very supportive and friendly to the soybean market due to the burgeoning soy demand from China. Argentina's internal issues have undoubtedly augmented our export sales, nonetheless there is real demand and growth for ag products in China and that is a story that has had significant shelf life. The demand for soy in China is growing, misunderstood, and understated. The trend is from the lower left to the upper right of the chart!

Friday's poor performance should setup a short term correction in the bean market. The market should slow down as Friday's highs will be resistance going forward. Support should come in @ 9.85. A close below 9.80 would turn the trend lower. Farmers with substantial old crop supplies should be very attentive to the trade. Taking on Jan highs will not be easy and may be impossible. We look like we are going to stall, set a stop under the market and let you be taken out. To clarify, I am not bearshish, but I am not crazy bullish at the current levels. We are coming into weather and planting which opens the door to anything, but "discretions is always better than valor" in this business!

A word on the stock market for those following along

An excerpt from the best book on trading I have read to date Reminiscences of a Stock Operator by Edwin Lefevre, a compilation of interviews with Jesse Livermore originally published in 1923

"The law punishes whoever originates or circulates rumors calculated to affect adversely the credit or businesses of individuals or corporations, that is, that tend to depress the values of securities by influencing the public to sell. Originally, the chief intention may have been to reduce the danger of panic by punishing anyone who doubted aloud the solvency of banks in times of stress. But of course, it serves also to protect the public against selling stocks below their real value. In other words the low of the land punishes the disseminator of bearish items of that nature. How is the public protected against the danger of buying stocks above their real value? Who punishes the distributer of unjustified bullish news items? Nobody; and yet, the public loses more money buying stocks on anonymous inside advice when they are too high than it does selling out stocks below their value as a consequence of bearish advice during socalled "raid"s. If a law were passed that would punish bull liars as the low now punishes bear liars, I believe the public would save million."

Some things never change as the above gives credence to my thoughts that we are all onboard what I call "The Financial Ferris Wheel". Stock buyers beware of buying a market 28 % off its lows. I often say that you can buy anything as long as you have an exit plan. Just be careful and fight the urge that "I missed the train" urge. There are still significant hurdles for us to cross that I believe will be offer better buying opportunities. However, if you must, just know when you are getting back off the wheel before you get on or you may incur self induced motion sickness!

I will close on another one of my favorite quotes from a truly great book.

"I did precisely the wrong thing. The cotton market showed me a loss and I kept it. The wheat market showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit."

Thanks for reading. Any questions or comments can be directed to me @ (717) 4362616 or to the below email.

Good luck,

Jon Hart

jon@keystonecommodities.com

Markets move higher after USDA reports

2009-04-07T13:15:00.000-04:00

Market Monitor—4/7/09

By Marlin Clark
Markets move higher after USDA reports
Grain markets have made new recent highs in the last week. The USDA Prospective Plantings Report, followed by friendly export reports, have helped fuel some bullish enthusiasm for the grains.
As we discussed last week, the corn acres were down, but not much. The big surprise was in the soybeans, which ended up with acres several million smaller than expected. The results have been dramatic, especially in the soybeans.
The recent, if you think of January as recent, high in the May soybean futures on the Chicago Board of Trade was the $10.69 posted on January 12th. That was followed by a $2.30 plus drop in less than two months. This acreage report is the primary factor in rallying us back nearly all of that. Since the May low of 8.38-1/4 on March 2nd, we have gained to as high as 10.09 by Monday the 6th—a gain of over $1.70.
The soybeans did not make a steady gain, having gained from the early March low to 9.81-1/4 by the 23rd, then losing 16 cents before the report gains. Tuesday’s overnight is just even, however, and the trading Monday did not hold the 10.09 high. We are currently at 9.94, 15 cents off the high, and looking for reasons to go higher.
The January high that we keep looking at in corn is 4.39/1/2. We lost most of a buck off that by the first week of March, then rallied to 4.03-3/4 on March 23rd before the report. I was surprised by that, anticipating a lot of corn acres. When the report came, we made a new contract high on report day, March 31st, at 4.06. April 2nd we got up to 4.07-1/4 briefly, and we touched that again this Monday. We are currently trading a nickel below that.
Corn is a sale now. The bullish beans are helping corn more than the acreage report for corn. That cannot last forever. New crop corn futures are higher than current. December futures are trading 4.34 overnight.
The next big news is planting progress. Reports will start soon. Planting may be delayed, as it should have started in some areas, and we have snow instead. It is too early to talk about delays for real, but that is what will run the market now. First it is planting progress, then the actual planted acres.
As I mentioned last week, USDA has a record of being accurate on the corn acreage estimate, but not the bean acreage estimate. The beans seem to be more driven by weather issues. The corn gets planted in all but the worst years.
The USDA Prospective Plantings Report has given us one more good chance to price grain. Respond to this now or regret it later.

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

Unsettled Markets

2009-04-07T07:11:00.004-04:00

Greetings Tuesday morning from a both windy and cold Mifflintown. The markets continue to chop around. I was pretty impressed yesterday with corn's ability to hold off weakness from the outside markets. I believe that the battle lines are fairly well defined in the grain market. We have seaonal forces being exerted on the market versus the poor feeding and ethanol margins. Seasonal weather and production uncertainty against economic weakness.

The dollar has a bid that has pushed crude oil back from its highs last week. As you may all wonder from time to time why I talk about the crude market, or the S & P 500 . The above chart is a daily of crude and corn and the S & P 500. Take note to how well all of the lines fit into each other, the market gets sick and returns to health in unison. If we believe that the worst is behind us economically, then more demand lies ahead and the market finds a "bid". Conversely, should we have another round of bad economic news that brings fear back to the market, people will either stop buying and or start betting against the market. I realize that weather and production concerns will trump the above correlation, but I believe that we must keep an eye on the outside markets when making plans or decisions. No matter how hard some fight this linkage, we are at the end of the day all on the same ride.

What do I expect to see today?

The overnight markets were a little weaker trading off a stronger dollar and a soft tone from the financial market. This may lead us a back and fill consolidation pattern as we approach the report on Thursday.

Short week with Good Friday has volume very light. This can make markets more spastic and unpredictable, especially with a report Thursday.

I think there are plently of dip buyers out here, this should support the market on any pull back. From my desk, the risk is to the upside in the short term. Feeders should be buying in coverage and farmers be slow patient scale up sellers. Prices will be supported until '09 US crops are well underway.

For those trading, buy any 20 cent pull back in the July- Nov spread, long N- short X for a lottery ticket. Stop out on a close below 50 cents.

Good luck,

Jon Hart

Who let the bull out?

2009-04-02T08:36:00.001-04:00

Happy Thursday from dreary Mifflintown. The crop report is out and behind us. Now it is the market's job to convince farmers to do what it wants. Right now the market is hunting bean acres and adding some risk premium as our carryout is not burdensome. I just put some new charts on my website this morning pointing out the technicals as the market sets up to make a charge higher. As I stated and state again, I am not crazy bullish, but friendy. We are having a feel good rally as the market is trying desperately to convince us that the worst is behind us. Remember it is the markets job to take as much money as possible from the majority of participants. Right now, the stock market is courting us into thinking that the light at the other end of the tunnel is not a train coming the other way but sunlight. We shall see. J

From the bear camp, I point to continued abysmal feeding margins in hogs and cattle. Ethanol margins are now nonexistent and this is the real sore in the corn market. This is why I believe that the rally should have trouble getting real legs. Real bull markets stem from strong demand and our disappearance is off 10% y/y. I realize the stocks to usage ratio in historical terms is tight; however, virtually none of the buyers of corn are making money and this is a problem for the corn bulls. Yesterday the big news of the day was EPA's announcement delaying their decision on higher ethanol blends until next year. Minus one for Sec. Vilsack. Pro Exporter released their 9/10 stocks @ 1.691 billion bushels which is on the higher end of the range.

Trade consensus is building for the acreage reported by the USDA will be the smallest reported of the year save for major weather and the market is going to bring in an additional 2 million acres. High prices are the best fertilizer for big crops, low prices act as a retardant. Low prices forced acreage on the fringes to be taken back out of production. Remember last year we were hunting for every last acre available for row crops, this year we can afford to idle some of these acres. This is as Martha Stewart says, "is a good thing".

So what do I expect:

I expect grain prices to continue to drift higher as we enter the planting/ growing season. Users should have good coverage for the next 90 days.

Look for the energy complex to break out to the upside on a convincing close above 58/ barrel.

See top side resistance for corn @ 4.25 futures, 10 beans and 5.60 wheat.

Have a great day!

Farewell to Jim Conners

2009-03-30T21:37:00.002-04:00

Greetings again from Mifflintown, Monday evening. Today I learned that a gentleman that I listen to daily on an audio feed from Chicago made his last broadcast on Friday. Today we learned that Jim had been battling cancer for three years and it took a turn for the worse over the weekend. So today was Jim Conners day on Futuresline, a small 2000 person group that discuss the markets on a daily basis. I sent him an email thanking him for his insight and wisdom. As a veteran bond trader, Jim had a uncanny ability to see thru the news and the hyperbole and could set aside the top 8 or 10 things that he thought the market would care about. He was witty and smart, an optimistic person that challenged you to think independently. Jim undoubtedly sharpened my skills as a market participant and helped to understand this business . Jim will be sadly missed by me and many others and we wish him the best.

Tomorrow morning at 8:30 am the USDA will issue the quarterly stocks report and the acreage estimates. After reading and reviewing all of the private estimates, the market will react most strongly in my opinion to the bean stocks and the corn acreage number. Today the market wanted to buy corn and sell beans. We will see if this leads to the report data or perhaps it is just a head fake.

I was asked 100 times today what the report will say. The answer is and was that I wished that I knew, but I obviously do not. Tomorrow's report undoubtedly sets the stage along with weather for the next 8 weeks of trade. The 30 year seasonals point to weakness in April and then a strong rally into late June.

The outside markets were very weak today. The stock market was all sellers on the news of a possible structured bankruptcy of GM and Chrysler. To me, the market was very overdue for a correction. We simply came to far too fast and some consolidation is in order. My next bogey is a retest of the past support of 741 on the S & P.

If the pending USDA report and the stock market sell off wasn't enough, we have the FOREX market to contend with. The dollars weakness had ended abruptly, sending crude oil prices plummeting adding to the pressure in the grain trade. Trading volumes are down significantly year over year. Last year in the heat of the trade, the front month corn contract traded in excess of million contracts, today the volume was around 85000 contracts.

I will update everyone tomorrow after the report. Please call with any questions or comments.

Good luck,

Jon Hart

Grain Market Wrap Up 3/25/09

2009-03-25T19:38:00.011-04:00

The nervous, spastic market continues to keep us on our toes. The wheat market gave up today as the rains and the forecast for much needed water was delivered to the hard wheat country. The wheat market is very thin and this is what happens in a long leaning wheat market that has no fundamental story except for weather. It really makes it impossible to trade in the futures pit, and it is equally as difficult in the cash markets in PA where there is demand. The w/c/b markets were all getting a little tired after 3 weeks of an uptrend. This does not turn me into a corn and bean bear, just settling in and letting the market consolidate its gains. The Linn Group wire today brought my attention to the below chart of unleaded gas.

Unleaded gas made a good trade breaking north of 4 months of trade. Taking this market half way back puts 50-60 cents on the price of gas. Fifty cents up on the price of gas is certainly not bearish corn. 3 gallons of ethanol from 1 bushel of corn adds money back into the ethanol trade, bolstering margins. Check out the gas crack on the next chart, this is a very seasonal trade that is looking ready run.

The next chart shows the May Nov bean spread. This spread is historically very wide as we remain competitive to China while Argentina works out her troubles. We get the sense that ending stocks for beans may be smaller than the USDA reported earlier. When and if SA gets her act together, this spread will come back in, putting pressure on the nearby, possibly on the back of smaller acres here in the US?? Hmmmm

The above 5 day accumulation map tells the story of wheat down 30. This should keep the drought bulls penned up for awhile. Look for wheat to turn into the weak leg of corn and bean trades, use any rally back in wheat as a selling opportunity for producers. As of the close of trade today, I still think there is more downside to beans tomorrow and Friday while corn will probably be supported around 3.80 and wheat will try to gain footing, maybe a little back and fill. Corn users should use this weakness to extend flat coverage.

Call for individual rec's as everyone has a different position and obviously without knowledge of your position, I cannot make specific comments about same. Use this info to formulate your own opinion. I tend to think that corn has room to the topside, maybe a retracement back to 4.20-4.40 ish. Maybe Tuesday's report will be the spark needed to get this market going. Beans are a little more challenging, more of a wait and see attitude. After we get thru August, our US and world supplies turn very adequate so it is a timing and a weather trade. These fundamentals make day to day rec's very difficult as the market can become supercharged in a minute and my computer is not a fast as someone sitting in Chicago or NY.

Good luck,

Jon Hart

Keystone Commodities Co.

I apologize for the formatting above. I created this post in another software program and during the import I lost all of the images . I am now searching for a better format as I have had my fill of this hokey ridiculous posting app. Better luck tomorrow they say.

Ready for Launch

2009-03-23T17:00:00.005-04:00

Market recap from Rich Feltes

"Disappointing finish today with across the board closes near low end of daily range
despite strong tailwind from crude and equities. Market knows that bullish news is
in for now with Argentine farm strike, heavy western Midwest rains this week and
Fed’s new PPIP program revealed for all to see leaving board free to back and fill
ahead of next Tuesday’s crop report. Soy oil scores rare gain flat price and
product share today on potential slow down in export flow from Argentina—world’s
largest soy oil exporter.

We just received handout from Pro-Exporters meeting in KC last week. A Few
highlights are as follows:
• Known crude oil reserves keep rising—not declining. OPEC exerts greatest
influence on price when demand nearly equal to supply which is not the case
at present with backdrop of weak oil demand. Additionally, the oil
companies are reluctant to make big investments based on crude trading
over $50/barrel for a sustained period. Almost all of the additional oil supply
globally since the 70’s has come from offshore sources—not onshore fields.
• The stock of unused but potentially arable land globally is enormous
especially in S. America, FSU, OECD nations and sub Saharan Africa The US
has added 10 mil acres to major crops since 2005—8 mil acres to C/B alone.
The world has added 57 mil acres to major crops since 2005. And although
the US share of total global corn area has held constant since 1970 at 20%,
the US share of world soybean area has declined from 58% to 32%.
.
• The average world temperature has trended lower for the past 8-10 years.

Guest speaker believes “global warming” will be history by 2019 having
been “killed” by either global cooling, better science or onerous cost of cap
and trade.
• Recent World Bank report says world is not running out of commodities. The
unprecedented size and duration of recent commodity price boom due to
unusual convergence of prolonged period of low energy/metals prices that
constrained supply growth, increase in bio fuels subsidies, decline in grain
stocks, surging GDP growth in developing nations, strong global GDP growth
and dollar depreciation. Most of these factors no longer apply or are
reversing today.
• Pro Exporter painted a pessimistic economic outlook noting that as world
retreats from debt, consumer spending will retreat as well suggesting a long
term downturn with is not bullish for crude oil. Obama stimulus will not spur
consumer spending. Japan in 90’s is the pattern most likely to repeated in
the US—i.e. sluggish growth closer to 0% than 3%.
Administration/Congressional preoccupation with fixing “carbon footprint”
will undermine growth.
• Pro Exporter’s 83.8 mil acre ’09 US corn are forecast prompts 9/10 stocks of
1.540 bi bu assuming 09/10 corn ethanol use of 4.014 bil bu vs. 3.556 bil bu
corn ethanol use for 08/09. Pro exporter’s 12.407 bil bu total ‘09/10 US corn
use is nearly 100 mil bu less that USDA’s Feb Forum forecast. Pro exporter’s
US corn carryout’s for the next decade do not drop below 1.4 bil bu and
surge to as high as 3.3 bil bu by Oct 2016.
• Pro Exporter’s 78.5 mil acre ’09 US soybean are forecast prompts 9/10
stocks of 0.529 bi bu assuming 09/10 bean use of 3.050 bil bu vs. USDA’s
Feb forum forecast of 3.073 bil bu.
• 5/08 US farm bill provides cellulosic ethanol tax credit of $1.01/gallon in
addition to generous incentives to producers to establish and transport biomas
crops. Pro exporter is adamant that cellulosic proponents have
underestimated cost of cellulosic acreage, cost of transportation and storage
of biomass and economic feasibility of converting biomass to ethanol. Pro
exporter concludes that “current policies on cellulosics are unlikely to
change—we can only wait for reality to intervene”.
Bottom line—upside momentum of last 2 weeks is unlikely to be repeated in final
week prior to March 31 report although sharp price corrections, other than wheat,
prior to next Tuesday are also unlikely"

Copyright by MF Global Inc. (2008) 440 S LaSalle Street. The information contained in this report has been taken from trade and statistical services and other sources which we believe are
reliable. MF Global Inc. does not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and
are subject to change without notice. The principals of MF Global and others associated or affiliated with it may recommend or have positions which may not be consistent with the
recommendations made. Each of these persons exercises independent judgment in trading, and readers are urged to exercise their own judgment in trading.

Greetings from Mifflintown on a sunny cold Monday. Last week the Fed's decision to increase its purchase commitments for GSE MBS and GSE bonds linked to mortgage lending caught the bond market off guard and the gold shorts. Gold rallied $ 60 per ounce in an afternoon and the dollar was decimated. The little advertised or understood fact about the purchases is that they will be made with excess bank reserves. It is not printing money to complete the purchase. The US and the world are in a strong deflationary spiral. On the contrary, all I hear from the tv is talk of inflationary fears and commodity purchases hedging off the inflation risk.

The dollar's weakness will support commodity prices, but there is risk in thinking the correlation is 1. A .78 dxm9 does not mean that anyone will buy US origin soft wheat. However, a .85 dollar makes beans leave in size. All things being equal, weaker currency will support commodity prices, but strong demand and shrinking supply is the only real driver in town and he is still missing. We cannot support higher prices for grains without significant demand.

The local corn market in PA is oversupplied. The animal numbers are down and the on farm stocks are still large. Basis is down 20 cents in the last week and 1/2 on the back of the 50 cent rally. From my sources in ethanol business, profitability is very negligible for the best operators, nonexistent for the late to the show. Last week saw Valero buying a chunk of Verasun's assets which label as bearish for the industry. probably causes more consolidation.

The Argentinian problems keep the bean market supported as does the dryness here and abroad support the wheat market.

We bounced off the .618 fibonacci retracement in May corn which should cool the corn market off a bit. I think farmers can sell into this rally in corn and beans and I would be looking to price some n/c wheat if you have not done so. As always, I hope that I am wrong and grain prices build on the lows and make a spring move. For the feeders and the consumers, I hope that hand to mouth buying saves them money.

We got the rally that we were expecting in the equity markets, now we will see what we can do from here. Technically it should be a little harder sledding. The dollar is still a very difficult market to predict, but I am not in the camp that we are heading to zero. The Pro Exporter's comments above concerning the crude market are very interesting to me. From a trading perspective, I am not sure that it matters, but it fits my bias that there is more oil around than anyone wants us to believe.

If anyone has the time, pickup a copy of the recent National Geographic and read the section on the Athabasca (oil sands) region in Alberta, Canada. This is where 10% of our oil supply comes from and it is an interesting article. Most do not know that Canada is the US' #1 crude oil supplier. A little know fact.

That is it for now. Next Tuesday the 31st is the USDA acreage report. We also have option expiration this week.

Good luck,

Jon Hart

Market Update, More Mixed Signals

2009-03-12T12:15:00.004-04:00

Greetings from Mifflintown, Thursday afternoon. I have been trying to stay quiet as the markets make those that talk everyday out to be a fool. Yesterday's USDA reports as I am sure you have reviewed by now were a little friendly to corn and beans, bearish wheat. The markets traded pretty aweful yesterday, starting higher and then falling to the lows by the end of the session, bearish right? Not so fast, Today we come out and start a little higher, and finish up on the highs of the day and new high closes in corn since the beginning of Feb. The above chart of May corn popping up today looking like we SHOULD have some follow thru. On http://www.keystonecommodities.com/ I have been showing for the last week the corn bean chart. We are battling back and forth and I feel like today's trade is validation that Mr. Market wants some more corn acres.

To keep things in perspective, corn is still in this 3.45-4.10 ish trading range. A couple of weeks ago we were talking the markets up as they were trying to extend. That was followed by the market being brought to its knees by the bearishness of Wall Street leaking over into the grain pits. When the stock market was kissing the 10 and 12 year lows, I commented on this line about how I thought it was constructive that the grain markets were holding up pretty well. All of this fits my trading bias right now, stock market up as everyone is still calling this a bear market rally. The higher we go, the better chance we have of pulling some sideline money back into the market. If this happens, we will have a little more than a short covering, we will have real buying and that will have an effect on our grain market.

Just so I am clear, tomorrow we could go right back down, it is Friday the 13th! But if we can hold this rally together, we will have something more to build a lasting rally on. I am bullish of energy from here, a close above 55 ish in crude will spark more short covering, perhaps we even get a .618 retracement out of it. Unleaded gas stocks are lower than we like as the refinery utilization rates are low. Refiners are seasonally gearing up for heavier gas runs while the gas crack improves in front of them. I would fill up farm tanks for planting and lock in summer needs. With ng below 4 you may even take a shot at fall propane?

If you have been hanging on by your finger nails to sell corn, you may get your chance. The basis for corn will be under pressure next week as the PA mills are stuffed. Feed demand is not all that stellar and the grain lines will be increasingly long as the market moves higher. Too many farmers wanting to cash in and get some working capital all at the same time. Bean basis is steady as the movement is not that active and demand from the SE is picking up. Basis could be very strong this summer if more beans don't show up. The PA wheat market is all but nonexistent. Dreadful!

So I look for the rally in stocks to continue as the market anticipates congress' move to relax accounting rules which should carry the rally farther that most think, bonds should keep getting hit hard as Uncle issues mountains of debt. I look for dollar to get hit to the downside which will help buttress and support all commodity prices in general. Grains should participate, look for a challenge of the upper end of the trading range to make another sale. This sounds great, let's see if we can pull it off. Right now I feel like we are playing a game of "Press Your Luck" as in we are all tired of whammies!!

This is a very spastic market full of head fakes and mixed signals. I like what we are seeing in the markets, but we have had our parade rained on in the past. Be careful of getting too bulled up on another 25 cent day. We are correcting and it is fun, just don't let the market convince you that the storm is all over.

Thanks for reading and good luck.

Jon Hart

Now We're Gettin' to the Gettin'

2009-03-05T19:50:00.002-05:00

Today was another dismal day on the market. I am glad that I am young and have time on my side with respect to my retirement accounts (at least that is what I am telling myself to help with the sleep) These are very sad days for Americans as we sit idly by watching our investments and life’s savings shrink on a daily basis. Anxiety levels are very high as our country is yearning for some leadership. My title tonight is getting to the getting and by this I mean that I see the financial markets accelerating to the downside that should provide the opportunity for an interim bottom. Citigroup is a penny stock and GM’s in house bean counters are finally admitting that there may not be enough duct tape and band aids to keep them from filing bankruptcy. As crazy as this may sound, this may be just what the market needs. If our elected officials will not focus their efforts on the financial industry, the market will do its job to force the issue. The market will do what it has to do to get the attention of our leaders. I am banking on them being smart enough to understand that what they are doing is not working and changing directions is what the market is demanding they do. I just hope they listen before the down hits 5000!

I believe that the push downward in the financial markets will bring the uncertainty to a head. The politicians have to be under severe pressure to quit campaigning and do something constructive for America (not just the bottom 95%, but all Americans). A mark to market holiday for the banks just may be what the market ordered. Without getting into the specifics, this would as I understand it free up capital at the banks and in short postpone margin calls. Once and if this happens and the automotive companies admit their insolvency, I could see a substantial rally that should carry grains higher into the planting season.

The grain markets all lost ground today as we watched the outside markets but I continue to remain positive as I see more of the stars lining up for a rally. Until we break out of the range, fading the trade is the only way to make money and that is the HARD trade. I look for a rally, grain farmers holding inventory should remain optimistic and commercials looking to buy for the next 90 days should take advantage of May futures south of 3.60.

Good luck,

Jon Hart

You can reach me at jon@keystonecommodities.com or 8773434278. Thanks for reading and I look forward to any feedback.

Gold Prices-- Corn and Crude

2009-03-04T18:14:00.008-05:00

The above image is a monthly chart of the gold to crude ratio and the gold to corn ratio. As you see on the right side of the chart, gold is historically expensive relative to these other commodities. When this ratio corrects as history depicts, will the grains hold steady and gold fall tumble? Perhaps corn and crude will rise at the same time as gold falls. I do not have the answer but it is interesting to study and may be the seed of a trade.

It currently takes 20 barrels of oil to buy 1 ounce of gold where the 12 month moving average is 12 barrels of oil to 1 ounce of gold. With respect to corn, it takes 256 bushels of corn to buy 1 ounce of gold. The 12 month moving average is 191 bushels of corn to buy 1 ounce of gold. As I study a chart from 1975 forward, never has the ratio held at these high levels for long.

The point here is that the excesses of last summer's grain market and the fear in the financial markets have once again pushed this ratio into an extreme. This is long term friendly to base commodities and not so friendly to the price of gold. A very related topic that I could have discussed was our dollar into multi year highs while yields on treasuries are at multi year lows. We are at extemes in many of these markets and excesses do not last forever.

In light of our government's mandate to reinflate our economy and spend our way into prosperity, large issuance of debt is a certainty and the bond market is telling us that yields may have to go higher in order to attract buyers in size. This drives bond prices lower and interest rates higher, not exactly what a failing economy needs.

The PA grain markets are very stable, corn basis remains strong in light of a weak futures market. I see this trend remaining in place until we get a short covering bounce that will get the augers turning again. Bean basis is strengthening as demand remains steady and farmer sales are very slow. Wheat is dreadfully boring, limited pricing by the flour mills and farmers are still in a holding pattern. Generally speaking, the market at large is a little more active than Feb, but people are still paralyzed by the volatility and the extremes in the market. Too many people do not have confidence in the future to do much of anything and this is exactly why our economy and our markets continues to falter. Opportunities are born out of chaos and extremes, the challenge is to find them and have the confidence to act reminding ourselves to check our emotions at the door.

Thank you for reading and please feel free to respond back on this forum or send me a private message at jon@keystonecommodities.com. I look forward to hearing your thoughts, interests, arguments, and comments. You can also reach me at 8773434278

Good luck,

Jon Hart

Ugly Monday and the Miserable M

2009-03-02T15:57:00.006-05:00

The M spells Miserable!! To the left is a monthly chart of the S & P 500 from 1985 to the present. There isn't much more that I can add to the pictured price action and the horific pain that is been dealt by Mr. Market. There are no safe trades out here as the public is long or in cash and the lower we go the more old positions get coughed up. This is not pretty and text books will be written about the excess liquidity from the late 90's thru 2010 that has created one bubble after another, dealing pain and despair to most of the participants.

I was delighted to get a copy of the latest annual report from Warren Buffet. Wall Streeter's need to take lessons from "The Oracle" when it comes to communcating his positions and transparency. The below is an excert from his latest letter to his shareholders explaing a losing trade.

"I told you in an earlier part of this report that last year I made a major mistake of commission (and maybe more; this one sticks out). Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year. I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars. I made some other already-recognizable errors as well. They were smaller, but unfortunately not that small. During 2008, I spent $244 million for shares of two Irish banks that appeared cheap to me. At yearend we wrote these holdings down to market: $27 million, for an 89% loss. Since then, the two stocks have declined
even further. The tennis crowd would call my mistakes “unforced errors.”

On the plus side last year, we made purchases totaling $14.5 billion in fixed-income securities issued by Wrigley, Goldman Sachs and General Electric. We very much like these commitments, which carry high current yields that, in themselves, make the investments more than satisfactory. But in each of these three purchases, we also acquired a substantial equity participation as a bonus. To fund these large purchases, I had to sell portions of some holdings that I would have preferred to keep (primarily Johnson & Johnson, Procter & Gamble and ConocoPhillips). However, I have pledged – to you, the rating agencies and myself – to always run Berkshire with more than ample cash. We never want to count on the kindness of strangers in order to meet tomorrow’s obligations. When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.

The investment world has gone from underpricing risk to overpricing it. This change has not been minor; the pendulum has covered an extraordinary arc. A few years ago, it would have seemed unthinkable that yields like today’s could have been obtained on good-grade municipal or corporate bonds even while risk-free governments offered near-zero returns on short-term bonds and no better than a pittance on long-terms. When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost
equally extraordinary. Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long. Holders of these instruments, of course, have felt increasingly comfortable – in fact, almost smug – in following this policy as financial turmoil has mounted. They regard their judgment confirmed when they hear commentators proclaim “cash is king,” even though that wonderful cash is earning
close to nothing and will surely find its purchasing power eroded over time.
Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re-examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually greeted by yawns."

Said well, what we need now is more to follow in his foot steps, admit errors, take responsibility, communicate a plan for renewal and stop whining about how it was someone else's fault and we are a victim of the times.

The grain markets are all closing on the lows and look horrible. I am unfortunately out of time and have to run, but lows are made with new lows, tops are made with new highs. This is very painful for the farmer with inventory in his bin. The lower we trade the more demand we stir up. This is not a quick fix or even a small pain killer, but keep it mind. We are searching for a low and a spark to avert our gaze from the outside markets. There is a story developing in Argentina in the bean trade, bean basis up strong today in SA, wheat areas in US and China are dry, and we are getting ready to go farming for real in the weeks ahead. Risk premium will haved to worked into the trade someday, just not today. That is all for now, good luck and keep your head down!

Jon Hart

Double Bottom?

2009-02-23T22:06:00.003-05:00

There is an old trading adage that says that one should be buying when the public is cryin'. We are testing the lows made in Nov in the stock market and so far they have held. Another axiom of trading and of life is that we everyone is thinking the same thing, someone is not thinking. We may be setting up for another leg down in all of these markets, but my money is on a bounce, maybe a big bounce. The fear and angst is so thick you can cut it with a knife. Market sentiment is overwhelmingly pessimistic with no one predicting anything other than pain, agony, and despair. The TV stations are selling gloom and doom, but we are at a time that I encourage you to hit the mute button and take a moment. I have learned one thing in markets and trading that comes to mind when thinking of the banks and the problems attendant to the equity markets, things that can't go on forever won't! Citi and BAC can only trade to zero.

On a positive note, the grain markets held up pretty well on a very grim day. Beans closed up a dime, while corn 1 and wheat down 9. The question remains in all of our minds, will the weakness in the equities chase the grains into another leg lower testing the lows made in early Dec. I am starting to see some give up selling from farmers who need to move corn, and just don't want to wait any longer on Mr. Market. There are mammoth bushels at the farm trapped above the market and any 20-30 cent bounce would instigate some aggressive selling from the producers. I have been rec. to farmers to sell basis and wait for the bounce, as any rally will immediately soften the basis in central pa as much as a dime, maybe more. Bean basis is very steady, no supply disruptions in what I believe to be a soft market. Wheat demand is also very tepid in PA as the mills have ample supply already booked and there are virtually no spot bids for wheat. This is not a normal phenomena this time of year in the soft red market, but this is not a normal year!

A couple random thoughts as I near bedtime in Mifflintown.

If you are considering a sale of corn on a basis, you may also consider a stop underneath us @ 3.43 ish May. This will protect you if we decide that we have to go check out the Dec lows. If we do and hold, buy some calls with the money saved.
The trade of the day was shorting March corn @ 3.60. This market is trading in a 3.60-3.40 range looking for direction. Look for a breakout of that range.
Corn has held up better in the sell off than beans and wheat. Another leg down may be led by corn?
The crush closed into new highs this afternoon which should help processors clear inventory and boost bean demand.
Believe that we still have a chance to sell into a better market, but make your plans now. Answer yourself this question, if they hit the ball to me, what am I going to do with it?
Congress telling us that we cannot live without Citigroup is utterly asinine.
What would be wrong with raising the fdic insurance to "infinite" that eliminates any run on the banks while reducing public anxiety and the need to debate "toxic"assets. I am so sick of hearing about that!
I fully support President Obama and we all must hope that he can find his footing; however, I find it bizarre that prior to the ink drying on the 800 billion stimulus bill our President is in front of the camera talking about cutting our national debt in half prior to the end of his first term? This is right after our Sec of State Hillary Clinton was in China encouraging them to keep their hand up in the bond pit. It all strikes me as a little odd?
Smithfield Foods announced a complete restructuring, cutting 1800 jobs and closing 6 plants. Also hearing rumors of them pulling production out of PA completely. Not sure of the details or the validity of the latter, but at face value it does not bode well for demand for feed in PA. The barns will be repopulated over time filling in the gaps, but only after the pork margins improve.
Last year was a very difficult year to manage through, especially if you were on the business end of the rally now evidenced by Pilgrim's Pride, Verasun Energy and countless others. Now Smithfield, the largest pork producer is reshuffling the cards. This reminds me that this is a zero sum game. Cheaper grain prices while ugly to the producer should help restore health to the balance sheets of the companies that we depend on to buy and pay for the crops that we produce.

Good day and good luck,

Jon Hart