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It's that time of year!

Agriculture.com Staff 01/15/2010 @ 10:51am

Until the shock of the government report on Tuesday, grain markets had held up very well in the face of a huge harvest. Rough calculations show that corn futures had rallied more than a dollar a bushel from early September until Monday. The proverbial dead cat bounce in soybeans was good for $1.90 from October 5 until the middle of December.

A bounce at or shortly after harvest is common in the soybean market but this one was more than normal. A big bounce in corn futures is unusual. This one was spectacular. Action in the markets following the report this week puts some ugly formations on the charts. It appears that there is going to be a serious correction before prices can move higher again.

Surprisingly, farmers' comments at the 4 meetings I did this week were generally not as negative as I might have expected considering that corn was locked limit down at least one day. Normally when I do marketing workshops in the winter prices are dismal and attitudes are very negative. I usually tell people that the function of the markets at this time of year is to make farmers depressed. In most years the farmers agree that it is working very well at the time.

The reason that the markets try to make farmers pessimistic is to avoid encouraging additional production in years of surplus. At this point, the fundamentals of the grain markets are such that there is no reason to discourage production. That may be changing. So far it seems that the world needs our production at least at the level of the past few years. Prices have not been high enough to bring additional acres into production. They are high enough to keep us planting at least at the level of the most recent years.

Historical charts show flat prices for most of January and February. As the calendar turns to March, the odds of a rally become much greater. Whether that rally starts from the current level or a much lower level remains to be seen. For many years there was a major low in the soybean market that usually came in middle to late February. That low has gradually become less prominent in recent years. Do not be surprised if there is a more pronounced soybean futures price break in February this year. The price rallied more than normal last fall. It has further to drop this winter.

Until the shock of the government report on Tuesday, grain markets had held up very well in the face of a huge harvest. Rough calculations show that corn futures had rallied more than a dollar a bushel from early September until Monday. The proverbial dead cat bounce in soybeans was good for $1.90 from October 5 until the middle of December.

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