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Crack in bull's armor?
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
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.
A few weeks ago we wrote about how hard it was to want to buy the emerging bull
market in March/early April as all the news was negative (and therefore the most
difficult time to buy it psychologically). Buying was not a euphoric decision,
but a glum one at that time. We said then that buying when you are glum (sad
about buying) and selling when you are glum (sad about selling) is the way to
make money. Why? Because if you are a bull, you are most happy when the market
has just run sharply higher. Are you happy about giving up your winner position
at that time? NO! But selling after a sharp run higher and everyone wants
the grain is the time to sell. We went on to say that just when you are tempted
to brag to your friends about your successful trading is when you should get
out. And if it is against what your ego wants to do, all the better. Not
popular trading, but profitable trading is the way to trade, and against your
Media types are starting to believe grain markets can only go up. After all,
the weather has changed, and still the grain market is rising. Outside markets
are going our way, and Obama has cured our financial/stock market problems. The
bulls think they are in control after a strong push higher, and reporters/media
have everyone convinced the bull is a certainty. Like we said a few weeks ago,
when we are the most sure of all that the bull market is correct (and everyone
agrees/understands it is a bull market), that is the time to liquidate and turn
bearish! Have we reached that point yet? Or if we haven't today, is it right
around the corner? Stay tuned, it's just starting to get interesting!
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 judgement and do not
guarantee 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 futures.
Ray Grabanski is President of Progressive Ag, a marketing and risk
management firm for farmers located in Fargo, ND. For questions or
comments, or if you are interested in more information about Progressive Ag's
common sense marketing services, call 1-800-450-1404 or email
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.