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Push, pull corn markets

11/11/2011 @ 3:36pm

I hate it when market analysts give both the bullish side of price outlook and the bearish side. Most farmers can understand that there are two sides to almost every situation. However, there is no way of looking at today’s grain markets without seeing two sides to price outlook. 

The crop report that was released this week should have been positive for corn and soybean prices. Soybean production was raised from the October report but it was lower than the average trade guess. Corn production was lower than in the October report and also lower than the average trade guess. Instead of prices going up, they went down. Having a negative reaction to a positive report is not a good sign for futures price direction!

In light of the bullish fundamental situation, it appears that outside markets like the stock market and precious metals are pulling the grain prices down when supply and demand should be pushing them up. Grain markets can be ignored for the time being when the economic conditions world wide are negative.    

On the other hand, when basis improves, at this time of year, and new crop grain is coming to town during or shortly after harvest, it is a sign of good demand. That in turn should be positive for price outlook. This week saw the basis improve on all three grains grown in my area. Soybean basis locally went from -$.60 to -$.52. Corn basis went from -$.27 to $-.21. Even wheat which has a very small part of the acreage here in Cass County, Nebraska, went from $-.50 to $-.45. All of these indicate that the users of these grains want farmers to sell, not store. I hope that eventually futures prices will go up as well to get farmers to open bin doors. 

Seasonally, this is the time when there is usually a strong market for soybeans. All criteria for the dead cat bounce have been met. However, there are usually four or five peaks in price before soybean prices head down in anticipation of the harvest in the Southern Hemisphere. That move usually begins about January 1. I always plan to have my old crop soybeans sold by then. As of today, the soybean market does not look like it is going to give me the fourth and fifth opportunities to make those sales, at a price higher than that on October 14. The market does not necessarily have to follow my rules. This may be one of those odd years when the pattern is not exactly what I expect!

My situation with the brokerage firm that filed for bankruptcy has changed only slightly since last week. Monday was the day to roll my long speculative position in soybean futures from long to short. Fortunately, the account had been transferred to a new firm and I was allowed to again make transactions. I got the roll made on Monday without a problem, except for the fact that the excess equity in the account was not moved. I continue to get daily position statements that show my balance. It does not change from day to day. At this point, I have not had to add any margin money. I hope that the cash will be released soon. 

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