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A game of 'chicken' for corn, soybeans

It seems as if the corn and soybean markets are on separate tracks. There are days when one grain is higher the other is lower and vice versa. 

Market commentators say that this is being caused by traders unwinding spreads between the two grains. If that is the case, this unwinding is probably not healthy for the market, in general, because the long term open positions are reduced. However, that situation can change very rapidly at this time of year, if some bullish fundamental factor would suddenly come to light.

This is the time of year when the long term seasonal charts show a strong tendency for soybean futures prices to rally. The basis usually follows suit as cash bids are improved to try to bring the last remaining bushels out of farmers’ hands. The time for this price improvement on the long term charts is between February 15 and May 1. However, the exact timing of this move is quite variable. In some recent years, the biggest part of the rally is in the first thirty days. It is quite possible that the recent move in soybean prices was the spring rally. If so, the best sales opportunities are past. Given the tightness of supplies in this country, I certainly hope that is not the case.

The corn market paints a different picture. The normal pattern for corn prices in the spring is for futures to be in a trading range with little net movement up or down. Most of the price improvement is the result of gains in basis. It is difficult to rationalize that being the case this year, with the basis already positive and cash supplies very tight. The scenario is set for a major weather rally some time before the end of summer. It is hard to have patience waiting for a rally with cash prices over $7.00 and with the risk of getting caught with unsold bushels if precipitation materializes and prices subsequently fall below the cost of production. 

All farmers are going to feel the results of the game of chicken that will be played out between prices and rainfall from now until fall!

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