Corn the new sheriff?
Corn has taken over the leadership of the grain bull market, with corn rallying to new all-time highs this week (July09 traded above $6!).
That has also led new crop winter wheat (CBOT and KC) to new highs as well, keeping the bull market alive, in spite of a very negative downside reversal in soybeans last week. Apparently, traders believe we will plant plenty of soybeans and not enough corn this year. With fertilizer prices astronomically high, we can understand why.
Crude oil has also participated in the recent commodity rally, pushing to new highs while the US dollar continues to crumble to new lows. There continues to be outside market support for higher grain markets, and that continues to propel winter wheat and corn markets higher.
It's interesting to note that HRS wheat and soybeans are not participating much in the recent rally, with the choppy nature of markets and liquidity problems in futures trades becoming a problem. We used to say that pork bellies was a money game, and didn't have much to do with fundamentals as it did with short term money movements. Grains might be becoming similar to the pork bellies, with elevators/hedgers/merchandisers shying away from the huge volatility in the market. Even some cash merchants are doing their best to avoid futures markets.
This creates an atmosphere that allows huge pushes in grain prices in a short period of time (see HRS wheat trading in February). The scary environment in the grains has made it difficult to make selling decisions at a time when prices are extra-ordinarily high. Pro Ag openly wonders if farmers will be tight holders of grain until harvest, and then a flood of grain could hit at that time - depressing prices. Never has there been a more volatile period in grain trading history!
USDA perked up the ears of traders with their cut of 30 mb wheat ending stocks in the March report, with a 20 mb cut in soybeans ending stocks as well - both from higher export projections. We seem to have no problem selling grain even at historic price highs - we can thank the US dollar for that! In other countries currency, US prices have not changed nearly as much in US dollars as they have to us, spelled US. World numbers were not as friendly, though, with higher Brazilian corn/soybean production estimates, and higher world projected carryouts.
Wheat prices in winter wheat continue to rally, pushing to new highs yesterday in the July08, July09, and July10 KC/CBOT futures. So, the bull market is alive and well in winter wheat futures. HRS wheat has already spiked much higher, but Sept08 new crop is following the winter wheat rally and near its old highs. The corn market is also strong, although yesterday it took a reprieve after closing at new highs Tuesday.
Grains markets continue to defy bears who sell off the market, only to see another grain push to new highs. Both HRS wheat and soybeans have some major negative technical action on charts, though, and will need to overcome these bearish signs if they are to follow other grains higher. We could have a potential top in place for both HRS wheat and soybeans, but with corn and winter wheat rallying to new highs we are still not getting a consistent signal from grain markets. Will they continue to rally, or are grains for the most part nearly complete with their 18 month bull market? It would be difficult for soybeans/HRS wheat to continue going down while corn/winter wheat rally, but given the erratic nature of grain markets, even that is possible to some extent.