Market complex falling into downtrends
The entire market complex has started to suffer, after having some positive attributes for a time this spring. Corn actually looked like a positive market for a while, after the Chinese started buying cargoes of corn. But recently, all grains have fallen into a funk, with wheat, corn, and soybeans now heading lower and threatening old lows on charts from earlier this spring.
It's not only the grains, but nearly all the outside markets look like they are in a funk as the Dow and S&P stocks are lower, and threatening to verify the lows under 10,000 printed during that wild day of trading a week or two ago. Crude oil has turned sharply lower, and looks like a falling knife on charts over the past 2 weeks.
The livestock, the bright shining star of the markets, have also taken a turn lower and may have formed a top for now. And the US dollar continues to soar higher, mostly at the expense of the euro while Europe tries to prop back up their fledgling economies.
This is quite a turn of events in just a few weeks time, and it all started with a flurry of activity on that day that produced a 1,000 point decline in the Dow, only to recover about 600 points of the loss in that day. But the Dow is back flirting with lower levels again, currently trading around 10,500. Can we test the 10,000 level area again in the coming weeks?
Crude oil has also stumbled lower, now pushing to below $70 after trading at $87 earlier this month. What a difference three weeks can make! We're about due for a rally in crude, but hasn't it been a huge run lower for now. It may take some time for crude oil to show some strength in the near term.
With all the negative outside influences in the markets, it has made it real difficult for the grains to show any signs of life. After all, the dollar is shooting to new highs almost daily, making exports more expensive to buy from the US than from other competitors. It's like we are pulling a plow behind us, trying to get some momentum and speed to take grains higher (with the Chinese corn purchases). But we just can't seem to unhook the 'plow' of the negative outside markets.
Besides dealing with the negative outside markets, we have a potentially large 2010 crop to deal with, as we had record-fast corn planting earlier this spring, and now we have moisture on top of it that should provide a good start to the 2010 corn crop. The initial rating of corn was not all that impressive, though, but then again the crop has never been rated so early before (we've never had 50% germinated this early before!). The rating of 67% rated good/excellent was just average, and actually would indicate USDA might be too high in their official yield projection of 163.5 bu (2.7 bu above their 'trend' rating). But alas, with warming of temperatures and getting further away from the freezing temps in some northern areas, the corn should 'grow out of it'.
Winter wheat crop ratings remain high at 66% rated good/excellent, and with moisture this week in HRW wheat country, including the dry western areas, should improve that rating even more. Already, Pro Ag is projecting a crop size potential of 48.8 bu/acre, well above 'trend' yields of 46.01 bu and also well above USDA's official first rating (45.9 bu) in the May report. The simple fact is that the wheat crop is likely to keep getting bigger as crop ratings continue to suggest an above average winter wheat crop in the field. There has been no measureable heat stress placed on this crop yet, and that seems to be the most important element for yield potential left in this crop year.