Grains in trouble?
Grains have a weak formation on charts recently, with soybeans, corn, and wheat all looking like they've recovered about as much as they are going to on charts after the sharp price break in January. Soybeans made it to $9.75 March futures while March corn rallied to $3.80, but we've quickly retreated from those levels. While many were getting excited about the potential for planting delays in the US, the South America crop is continuing to expand in its potential.
USDA recognized the outstanding yield potential in South America when they hiked Brazil soybean and Argentine corn production numbers in the March 11 monthly report. That meant higher world ending stocks of both corn and soybeans, a more negative picture for sure as we move into the spring for US planting of crops. South America has a real binbuster in progress right now, and that is just putting a lid on price rallies for now. Contrast that with last year at this time, when SAM crops in Argentina were withering under a severe drought. We've got the complete opposite picture for 2010, with an outstanding SAM crop coming on at this time.
The revisions of the US crop look small in comparison to the SAM growing season added yields, with the US corn crop cut 20 mb and soybeans cut just 2 mb in production. These revisions recognized the problems harvesting these crops in 4 soybean and 4 corn states. There remains to be revisions to the ND and SD crop, as they continue to have significant acres left in the fields. Some estimates are as high as 50% of the corn crop left in the field in Cass County, ND as of March 1. This is quite the problem for these growers, as they try to balance the act of letting the snow melt enough to harvest the grain, and yet having enough frost left in the soil to support combines. This is indeed a balancing act, with the potential window extremely important to growers for having a chance to plant 2010 crops.
Farmers in MN and WI had a nice window of opportunity to harvest the late corn, and maybe it was providing some harvest pressure to markets this week? Not often that we hear the words 'harvest pressure' in March, but for 2010 we've already had a lot of unusual events. Weather has been erratic at best, with more moisture across the nation's midsection this week, keeping soils completely saturated. Delayed planting looks like a near certainty across the central US, with more flooding rains in KS and NE this week (its not often these states are included in spring flooding reports!).
So the unusual late winter/spring continues in 2010, with markets turning mostly lower as we head into a strong seasonal time frame for markets. Is 2010 going to be the counter seasonal year, when prices do the opposite of typical seasonal price patterns? With a rally at harvest (October and November), we sure had a good start to a counter seasonal market behavior!
As we move toward the official start of spring, we have a sagging market - one in trouble as far as the marketplace is concerned. One only has to open an eye and examine the dynamic change in the sugar market that occurred recently, with sugar dropping 33% in just weeks recently and suggesting the market top is in. Cotton has also been a hot market to date, but even cotton is starting to struggle recently. Perhaps the bull markets are failing, and that is letting the sideways markets of grains turn lower as well.