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Ray Grabanski: Rain stops corn rally?

Ray Grabanski 04/21/2011 @ 7:23am President, Progressive Ag www.progressiveag.com

Grains had a very strange trading day Wednesday, with prices starting sharply 

higher, but ending sharply lower for wheat and corn, with the heaviest 

losses in the corn market.  

The markets fell despite heavy rains expected to fall in the southern Corn Belt this week (5" or more in southern ILL/IND/OH and parts of MO) that are likely to further delay what is turning out to be a late planting spring for the Corn Belt.  Go Figure!  Meanwhile, HRW wheat country can't seem to buy a rain in western KS/OK/TX, where drought is absolutely devastating the winter wheat crop.  

In a few weeks, there will be nothing left to salvage if it doesn't rain soon, and the forecast continues to call for rain everywhere EXCEPT the dry HRW wheat area.  Its almost uncanny that the entire country can have a wet forecast except for the few hundred miles where HRW wheat is heavily concentrated.  Boy, you couldn't even write a more bullish script for this spring than the one we've been handed thus far!

It's already moving into late April, and most planters have yet to even get started planting corn and HRS wheat!  Current weather forecasts call for at least another week of VERY WET weather, and the following 8-14 day forecast doesn't look all that much better.  But hope springs eternal, and some rumors of improving weather on the way had some people selling the market today.  

So, who was selling grains today, causing a downside reversal on daily charts?  The most likely culprits are the fund traders, who have ridden the corn market up from under $4 to the current prices well over $7, and have made a fortune owning the grain commodities, during a time when the stocks market was mostly flat to slightly higher. That huge profit from owning commodities has to be cashed in sometime, and what better time to do it than when everything looks the most bullish.

The question the market has now includes:  Is this the top in the market?  Can prices move lower from here? Or, is this just another selloff that is presenting a buying opportunity for grains, like so many other selloff's in the past year?  

Absent some drastic improvement in weather, it would be hard to imagine 

the market topping at this time, that is, based on US weather alone.  However, when you look at the weather of South America, which is completing harvest of its bumper soybean crop right now, under mostly sunny skies and warm weather (ideal for harvest), maybe it isn't so far fetched to see US prices slacking off for now.  Or perhaps the FSU countries, with Russia, Kazakhstan, and Ukraine's much improved outlook from last year's summer drought.  This spring has included plentiful rains and cool weather in most of Russia, and farmers there are anxious 

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