Regular readers know that I hate talking about the December to February markets. Actually, I started complaining about the time between Thanksgiving and Christmas and it got worse and worse.
First, I was just wrong. That’s the word you don’t read in other marketing columns that lets you know I have some integrity. I was wrong because I said nothing would happen and then it happened – up and down and up and down.
Then I said that nothing would happen in January and I was mostly right but there was a lot of volatility as traders continued to trade minor weather adjustments in South America.
We “killed” the crop in Argentina and then overreacted when it rained a bit. Next we talked about how much smaller the crop would be due to the rain before realizing that we didn’t need all the rain so the crop wouldn’t drop as much as the rain.
Eventually, we managed to use the same rain forecasts to hurt corn prices and support soybean prices. All of these things just remind us that sometimes we have trouble explaining the markets after the fact. If we really knew what was going to happen, we would just trade the futures markets and not even bother to comment publicly.
If you have stock and futures traders buying ads to sell you advice, you have to ask yourself if they are taking the risk-free step of selling advice instead of trading commodities and stocks.
All of this reminds me of how I got out of speculating on grain futures. I found myself managing grain position in a little elevator. I used one side of my brain to specify my own account while using the other side of my brain to protect myself from the elevator. I discovered that my brain wasn’t that easy and my paycheck depended on working for the elevator.
So what trends did we see last week, either real or imagined?
Corn
In corn, we had bullish news without a bullish reaction from the market. We’ve had sales to China, continued weather problems in South America and had good export sales, but the March futures contract was down four cents last week.
The February 6th contract saw another three-quarter cent drop. The close for March futures on Feb. 6 was $6.781⁄4, right in the middle of the recent range of $6.611⁄4 to $6.883⁄4.
On the map we see a pennant formation, sometimes called a spiral. As this intensifies, we are running out of chart space to stay within recent trading history. The chart “must” start an uptrend or a downtrend.
The current view is that if bullish news doesn’t push the market higher, we are likely to go down in the near term.
Currently, corn exports are only two-thirds of the five-year average. China had bought very little but bought almost 320,000 tons this week, the highest level since May. In the Argentine weather clock we see a little rain, a big increase in the status reports, but still only 22% good and excellent.
More good news comes for us from Ukraine, where reports say grain production could fall by a third this year. I cannot understand how the farmers there could produce so much at all.
soybeans
Then we have soybeans where we had a lot of volatility this week and were able to hold some gains. There was good news and it showed in the prices. Our exports are ahead of forecasts.
The Brazilian currency appreciated, making their crop more expensive than ours, although some estimate our soybeans still cost an extra dollar per bushel shipped to China. Keep in mind that we are approaching the early harvest part of the South American year, which begins in northern Brazil.
Once the beans get rolling, China will begin sourcing supplies from Brazil. The weather was better in Brazil and improved last week. Soybeans are up 17% in health rating in three weeks. Nevertheless, our balance sheet is getting tighter and tighter.
The January report forecast a carryout at the end of fiscal 2023 of 210 million bushels. Now the report coming out in a few days could be closer to 200. As long as this number stays around 200, we will see fixed prices.
Which brings us to wheat, which was up 6 cents last week and gained almost a penny on February 6th. Despite a slight trend improvement in wheat, a key commentator said there is no real news in wheat.
This while we wait to see what great task we will see when the wheat comes out of dormancy.
STAY INFORMED. REGISTRATION!
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