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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!).
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.
So for now, the new sheriff in town seems to be
corn, which is leading other markets higher for now. But, can this new
sheriff keep the other grain townsfolk behind the bullish rise?
The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be
reliable. The opinions and recommendations contained are based on
our judgment and do not guarantee that profits will be achieved
or that losses will not be incurred. Recommendations should not
be construed as an offer to buy or sell commodities. There is
substantial risk of loss in trading futures and options on
If you have questions about this column, call Progressive Ag at 1-800-450-
1404, or email Ray at email@example.com (return receipt requested).
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!).