Market trends spell trouble for bulls, analyst says

Exports of wheat and soybeans are slowing, while corn is still OK.

For at least six months, the Wrong-Side Randys of the world have been calling for a market top – mainly because they were wrongly sold out long ago – and then the market really started to rally.  

In almost all species of life (even ants), researchers have found there are a few who seem to figure out things quickly, and then there are the rest. That is why when the pandemic hit and stocks plummeted, the majority probably liquidated at or near the bottom (if they did anything at all), and turned their 401K into a 201K.  

The market went right back up – and now stocks are at new highs.

The Wrong-Side Randys of the marketing world aren’t doing much better. 

Right now, the market has been unable to go higher the past six weeks, stalled out at old highs. Corn has a potential head-and-shoulders top formation over the past six weeks, with soybeans a double-top formation five weeks apart that also is ominous for technical traders. A number of other confirming factors of a market top occurring include the shrinking open interest, as large speculative traders continue to liquidate long positions. Small traders tend to push the market higher in night trade and low volume times, only to meet with massive selling/liquidation by large traders.

We have a divergence of old- and new-crop values, with bear spreads working (new-crop gaining on old-crop values). That is not the sign of a vibrant, demand-led bull market. In contrast, it’s a sign of an emerging bear market.

In my mind, that spells trouble for market bulls. Add to it private forecasts of SAM crops rising back up to near trend yields (for example, 132 mmt Brazil soys vs. 120 to 125 in January). If you want a confirming factor, just start reading the advice of Wrong-Side Randys. If it is a top, they should be talking about another leg higher – they have a knack for staying on the wrong side of the market.  
 
For now, SAM weather remains mostly favorable in Brazil, with below-normal temps and above-normal precip – at least favorable for the growing crop, but it’s not very good harvesting weather. Argentina has some adversity forecast yet with mostly above-normal temps and below-normal precip that will likely further stress crops there the next two weeks. U.S. weather is variable, with above-normal temps returning for the next two weeks, and very little precip in the western Corn Belt.  The drought is still alive and well in the western Corn Belt/Plains.   

Exports of wheat and soybeans are slowing, while corn is still OK.  Wheat exports are running 4% behind normal vs. only 2% last week, with USDA guessing they will be up by 2%. Corn exports are up 81% (vs. 80% last week), with USDA guessing corn exports up only 46%.  Soybean exports are +76% this week (down 1% from last week) vs. USDA guessing +34% for the year. Brazil soybean harvest is 25% done vs. 40% last year so they are suffering harvest delays, with most crop estimates around 132 mmt Brazil, and 46 mmt Argentina as the Argentine crop is rated only 15% G/E vs. 19% last week and 64% last year.  

Corn prices are lower on expectations of larger SAM exports. Planting has begun in the Northern Hemisphere, with 3% of the Texas corn crop planted vs. 7% average. Brazil’s second-crop corn is 39% planted vs. 67% last year, and the later they plant, the more risk the crop has, so this is getting extreme. Argentina’s corn is dry with ratings 30% G/E vs. 24% last week and 59% last year (bad but improving). May wheat is finding some support with lower HRW crop ratings, with Kansas at 37% G/E (down 3%), Oklahoma 46% (-2%), and Texas 28% (-2%). Matif wheat futures made new eight-year highs on the lower supplies. Is it wheat’s turn to become the market leader?  


Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is president of Progressive Ag Marketing, Inc., a top-ranked marketing firm in the country.  See progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com. 

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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