Grains are slowly breaking out of their recent price ranges, with soybeans and corn running to new recent highs lately on continued dry weather in South America. Argentina, especially, is experiencing dry weather in some main growing areas, helping many to trim their crop production estimates for both corn and soybeans. Dry weather during this critical time period certainly can trim production outlooks.
Grains are all approaching their recent highs. Wheat, corn, and soybeans are within striking distance of the two-year highs made for all three crops. This indeed is going to be a very Merry Christmas for most farmers, as prices have not sat at these price levels much during the history of grain trading (perhaps a few months).
Grains have some great examples in the commodities of just how volatile things can be, as sugar, cotton, and coffee all are giving the grains a sign of the type of strength that commodities can get when people are short supplies.
Grains have continued their recovery this week, gaining back even more and approaching the yearly highs again in corn and soybeans, with wheat running back to the old highs. This was quite a retracement for wheat, gaining a $1 in just over four days of trading! After challenging those highs, they've retreated a bit, but it is impressive to see these healthy gains on the strength of the Australian crop problems with their recent wet harvest.
Grain prices have had a healthy run higher in 2010, in spite of relatively decent US yields of most crops. That has allowed farmers to have another good year in 2010, not quite as good as 2008, but profitable nonetheless.
Last week we commented on the disappointing reaction to the USDA November report, and how it had showed the first indication that the bull market was tired. Since then we have formed a weekly downside reversal in corn and wheat (both last week) that indicated a potential top had finally formed in these two markets. This week soybeans have found tremendous price weakness such that we've dropped $1.50 from the most recent high in only 5 trading days!
Our election is over, and while the Republicans can celebrate their wins in the House and gains in the Senate, it might also be true that now that no one party controls the House, Senate, and Presidency that there will be more gridlock in Washington. Gridlock might not be all bad, though, as generally the US economy is stronger the less government seems to do.
Just when the market bears were lulled to sleep, boom, the market has another limit up day in corn today (Wednesday) that pumps the market right back up near old highs.
Grain prices exploded to new highs in corn and soybeans after, last Friday's blockbuster USDA report, where corn yields were dropped record amounts during an October report of a non-drought year.
Last week we talked about how markets were at a pivot point for corn and soybean markets, as both rallied sharply to new highs, yet there were some cracks in the bull market with some moves lower in corn (while soybeans continued to rally to new highs). Today, we have a market that so far this week has been variable at best, first rallying to new highs on Monday morning, only to close lower and add to those losses Tuesday. Wednesday's overnight trade was also sharply lower, making the bull market in jeopardy as we were on the verge of losing the upside momentum that the market has held si