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Emerging bear market?

Agriculture.com Staff 12/16/2009 @ 6:14pm

Last week we talked about the cracks in the bull market -- some signs that the bull market may be struggling or ending. With the weakness last week in grains and outside markets, we may have our trend change firmly in place by the weekend. The crack in the bull market may be busted wide open with charts starting to point lower in grains, following some of the outside markets.

We mentioned the difficulty in the crude oil, gold, metals, and the turn in the dollar to an uptrend, and charts this week are so far doing nothing to alleviate that possibility. Sure, we are getting bounces in crude oil and gold, but just enough bounce that you'd expect after a market starts a downtrend. This is not a good sign for grains.

Grains have bounced back nicely from recent losses, but it is only midweek right now, and not the final results posted for this week yet. Lots can happen, and usually does, by the time a week closes out. So far both corn and soybeans have bounced back nicely to a sell point on charts for bears. We would not be surprised to see prices retreat from here -- as they should if the market starts a new downtrend. Corn has a nice, rounded top going -- with the turn already pointed lower with the recent price charts. Wheat is a little more advanced than corn, with soybeans the only strong market that might actually get back to the old highs this week (will we fail there?).

What is keeping the soybean market so strong compared to corn and wheat? Soybean exports are still stalwart, very strong and continue to surprise us by basically selling more soybeans than both corn and wheat combined! That a few years ago would have been considered impossible, but here we are. The Chinese are strong takers of soybeans out of the U.S., and are sucking our supply pipeline dry for now. Yet basis of soybeans is soft? Why?

Harvest of soybeans finally neared completion, with the southeastern North Dakota growers struggling into mid December to get the crop harvested. But in spite of all the hoopla regarding the delays, most of the crop actually got harvested (some in snow). It's amazing what farmers can do when they have to, with this just another example of how much adversity can be dealt with on the farmer's side. Anyone want to bet farmers don't get the rest of the corn harvested??? I don't want to make that bet - not with the history of dealing with adversity farmers have!

USDA tells us that 92% of the corn is now harvested, with only 4% done last week. This may continue for the next few weeks and even months, though, as now farmers don't seem in too much of a hurry to get the remaining wet corn out of fields. After all, it might be a better management decision to leave it in the field to dry when its over 30% moisture. It's not often you can say it, but with a huge carry in spreads (5 cents/bushel/month) and a likely basis bump (also 5 cents/bushel/month?) it might be just as well to leave the corn until early spring.

It will also dry down to around 20% moisture by March, and its likely to gain test weight and quality while it does dry. So financially, even with some loss (which has been minimal for those who 'winter harvested' last year) it might be better financially than trying to harvest now. North Dakota farmers are only 60% harvested as of Monday, so it might take another 8-12 weeks or more for the harvest to be completed. But then again, in early September we didn't expect any corn to be harvested in North Dakota. Now we know there are bushels and lots of them out there, so we know there will be a significant harvest from those remaining 40% of acres. These acres were expected to be disked in September, when prices were much lower. Farmers seem content to get what they get when its dry, and with no discount or poor looking grain for buyers to discount badly.

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