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Crack in bull's armor?

Agriculture.com Staff 05/21/2009 @ 1:56pm

The bull market has been alive and well this spring, driven by stability in financial markets and a rally in energy and stock markets that has solidified the values of many grains. Argentina's production problem in soybeans has added to the bullish enthusiasm as China keeps buying soybeans from the US, when the US doesn't have any more soybeans to sell them. And slow US planting progress of corn, soybeans, and HRS wheat added to the fire.

So we've added $3 to old crop soybeans, and $2 to new crop soybeans in a short time, with nice rallies in corn and wheat as well. Markets are pushing to new recent highs again today, with soybeans pushing through old high areas and wheat and corn knocking on the door. But just when things looked like the bull would keep running, prices started breaking today and rather than finish with strong gains in corn (up 10c at one time), prices finished with a whimper (just small <1c gains). While we barely avoided a downside reversal with the fractional gains today in corn, at least it was avoided.

The improving weather (warm and dry so far this week) should allow planting progress to develop later this week in many soggy central/eastern Corn Belt areas, yet the market rallied to new highs. That's unusual to see an improving weather forecast, and prices improving as well. However, today's price weakness in corn is starting to look like a crack in the new bull market's armor! Grains may be looking at a change in the weather pattern as well, as much drier weather this week is making us take notice that the previous wet pattern may be changing. When was the last time we looked at 3 days of virtually no rain in the majority of the Corn Belt? Yet, the last 3 days has been almost absent of any showers.

While weather is suggesting changes might be in order, the outside markets are calling for more of the same, with a crude oil market that continues to rally and a weaker US dollar today. These trends have been ongoing and are consistent with a stronger grain (bull) market.

The bottom line in today's market? There might be a change of pace from the current bull market, and it will be important to take notice of any new developments on the market front. This is also typically a time of year when sales of something usually work out (it was about a month later in 2008, late June, when sales were best). Pro Ag is getting a little more trigger happy on sales with the kind of news we have so far this week. Higher prices have a way of letting a person take a wait and see attitude, but sometimes that's the worst thing to do when prices are good.

New crop soybeans have busted $10 today, not a bad price considering just a few months ago talk was of 300-500 mb carryout in soybeans. Yet here we are, right at planting, staring at $10 soybeans! While we don't know if prices will go higher from here we do know $10 soybeans has historically been a pretty good price for soybeans off the combine.

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