Roy Smith: Bipolar markets
A Facebook friend who lives in Kansas City said that the weather in her area was “bipolar”. I could say the same about weather here in Cass County Nebraska. Wednesday it was sunny and the temperature was in the 50’s. Yesterday the day started out cloudy and cold, but ended up with five inches of snow.
Sharon took my pickup to town for some repairs, planning to have them done by the time she finished working at our church’s soup kitchen. About three o’clock she called and told me to bring the car and take the pickup home because she does not like to drive the pickup in the snow. By the time I got there and got the pickup, she had decided to leave the pickup at the church, get the grandkids from day care and head home in the car. By the time we got home our road was almost drifted shut.
I could say the same about the grain markets this week. After a positive reaction to the February government report, the markets seem to be spooked by the unrest in the Middle East and Africa. Nothing much has changed fundamentally in the supply and demand situation. What has apparently changed is the attitude of traders.
February is not normally a month I want to be selling grain. Market peaks historically seldom come in February. For that reason, I have not been too concerned by the latest drop in prices. It was easy to feel that prices could continue to go higher with the trend higher since last summer and the positive attitude generated by the crop report. Looking back, the local cash prices at elevators close to my farm of $13.81 for beans and $6.46 for corn were astronomically high when compared to any previous February.
Now that the cash soybean bid has dropped $1.28 and the cash corn bid has dropped $.25, the price is still high compared to other Februarys. I wouldn’t try to discourage anyone from making sales at these prices even if there are still three days left in this month.
The markets are also bipolar in that some technical indicators point higher and some indicate prices are headed down. I track a moving average that uses a 15 day average and a 45 day average. This kind of moving average did very well at picking the up trend that we are experiencing now. It will not do as well at picking the down trend unless the trend changes gradually.
One of my Murphy’s Laws states, “For every expert who says prices are going up, there is one who says they are going down”. That is a good maxim to follow in the current situation. Notwithstanding my bias against selling in February, if current prices offer you a profit you are satisfied with, sell something. Be sure to save a little back to sell later in case the bull trend resumes. There is still a lot of time before another crop is produced in this country!