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Market changes when it's time to

Agriculture.com Staff 02/12/2010 @ 12:00pm

Comments I hear in late February, in many years, ask why the market turns from a downtrend to an uptrend in the middle of winter when the fundamentals do not seem to have changed. That is certainly the situation this week with grain futures putting in a positive week after being down during much the month of January and the first week of February.

There are certainly a lot of negative factors weighing on the markets right now. The beginning of harvest in the Southern hemisphere will be a factor to watch for the immediate future. Huge crops harvested last fall in the United States weight on the cash markets as farmers and speculators become weary of waiting for prices to rally.

The best answer I can give to those wondering how the sentiment can change so quickly is that "It is time". That quip does not satisfy most people. A look at the long term charts show that soybean futures prices have gone up 18 of the last 30 years between February 10 and the end of April. The average price improvement during that time was 23 cents. While that might not seem significant, it must be remembered that the average includes years when the price level was much lower than it is today. It also includes 12 years when the price went down.

Technical factors also indicate that there may be positive moves ahead for soybean prices. No carry or very small carry in the cash soybean market is a positive factor. That condition does not exist in the old crop corn market. A gap on the charts in early January following the crop report may be a target that prices will aim for if the recent strength continues.

The fact that the seasonal high in cash soybean prices has never been in February at least hints that spring rallies are possible even in the worst of years. So far there have been only five trading days with prices higher than the February 5 low. Price strength early this week may be just a quick blip on the charts. Today's action certainly makes it look as if that is the case. Or maybe it’s just a minor correction in a fledgling rally. In February it could go either way. At this time of year it doesn’t pay to get bullish.

I will be at the Successful Farming Beginning Farmers Conference in St.Louis next week. I hope to see many of you there..

Comments I hear in late February, in many years, ask why the market turns from a downtrend to an uptrend in the middle of winter when the fundamentals do not seem to have changed. That is certainly the situation this week with grain futures putting in a positive week after being down during much the month of January and the first week of February.

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