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Turn time?

Agriculture.com Staff 12/12/2008 @ 10:53am

For a couple of weeks now it has felt to me like the grain and energy markets are trying to make bottoms and change trends. Last week, I got one of those subtle hints that grains might be about ready to turn higher. Two market analysts who are normally very positive indicated that there was no hope for grain prices to get better. Some time back I observed a key reversal higher in the stock market indexes.

On Thursday, December 11, the government issued a report that was considered negative for corn prices and neutral for soybeans. The negative reaction to the corn number lasted only a few minutes. By the close of trading, both soybeans and corn were sharply higher. When prices close higher on negative news, it is technically positive in most cases. Here is nothing that says prices have to go higher, but they usually do.

Farmers get frustrated by the seemingly illogical reaction to a change in fundamentals. Experience tells me that in most cases markets are not logical. When a move like this happens, it is difficult for farmers to quickly adjust their attitudes!

Following the report one commentator stated that the outside markets and general economy were more important to price direction of grains than the numbers just released. The equity market that I follow has been higher for 16 days. Crude oil has been up only four days. The soybean futures market has been up four days. On the other side, the dollar index has been lower 13 days. It normally goes the opposite direction as grain as it has this time.

None of these factors individually mean that grain prices have to rally. However, when lumped together they indicate that prices can go both directions. One broker commented that farmer selling of grain futures was very heavy the day December corn broke through the $3.00 support. If that is true, those who panicked may help in the recovery if they panic again and rush to liquidate short positions.

Seasonal charts do not show this being a good time to sell grains. Under most circumstances I would not even consider selling now. However, if cash soybeans test the highs made on November 4 I will consider pulling the trigger on beans in commercial storage. At that point the price will be more than a dollar above the harvest low. History shows that level of improvement has been historically difficult to hold for very long.

The above comments were written early Thursday evening. On Friday morning the results of overnight trading indicates there may be a challenge to the recent lows in reaction to the failure of the proposed bail out of the auto makers. Again, the outside markets are going to be more important than supply and demand fundamentals. Today’s close in all of the markets will be very important to short term future price direction.

For a couple of weeks now it has felt to me like the grain and energy markets are trying to make bottoms and change trends. Last week, I got one of those subtle hints that grains might be about ready to turn higher. Two market analysts who are normally very positive indicated that there was no hope for grain prices to get better. Some time back I observed a key reversal higher in the stock market indexes.

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