The bullish markets that have added nearly a dollar to wheat, over $2 to soybeans, and 88 cents to corn prices, seemed to run into a snag on Monday, March 10.
Prices crashed, in some cases adding to a retreat from highs on Friday.
In the recent case, both the bull action and the bear action come from the Russian Bear. Tensions in Ukraine have pushed prices. It is hard to see why, but uncertainty is what drives prices higher on the Chicago Board.
On Monday, however, the mood was that there was no new news. One principle of bullish action is that the bull must be fed. That is, we need more news every day to sustain a rally.
Continued instability
The news Monday was that the Ukrainian province of Crimea had voted to withdraw from Ukraine. The fact that the Parliament building was, at the time, surrounded by Russian troops may have been a factor in the vote, but maybe that is just me.
There is a tug-of-war in political opinion in Crimea, according to reports. On the one hand, the region is ethnically more Russian than the rest of the country. On the other hand, a poll last year said the majority wanted to be independent of Russia.
Major political observers over the weekend thought the deal was done, that the Russians had taken control of the region and nothing would be done about it. This felt like some stability was coming into the military action, and might be why some stability came into the market, if you can call a crash “stability.”
In this case, stability is represented by a return to trade reason.
Monday, May corn futures, which made a high on Friday at 5.02 1/2, dropped back to 4.75 1/2, a change from the high of 27 cents. For the day, the contract was down 10 3/4 cents.
May futures had gained 88 cents since the low on Jan. 10.
In like fashion, the soybeans put in the high of 14.60 on Friday, but a low of 14.14 on Monday. They closed down 39 cents for the day. Since the low on Jan. 24, the contract had gained over $2.
May wheat futures followed the trend. Early in the crisis, wheat led the markets. Friday May futures were up eight cents for the day, and put in a high of 6.63.
At one point Monday, though, we were trading at 6.39. We closed 13 1/4 cents lower, and at the low we were 24 cents off the high. May wheat had gained 99 1/2 cents from the low on Jan. 30 to the high Monday.
Now what?
So, what do we look forward to now? Technically, we are still in an uptrend, but must consider this a serious correction.
The next few days determine if we start a slide lower, or stabilize at these prices.
The only fundamental news right now was the USDA reports Monday, which had little effect on the market. Most significant might be the lowering of the soybean carryout a whole 5 million bushels to 145 million. This is not much, but it is in the right direction.
The market still worries about the tight old crop supply for the summer. That is what started this rally, before the Bear clawed the underbelly of its Black Sea port.
Even with the sharp break in prices, soybeans must be considered a high price, and must be sold.
New crop sales are picking up. It is hard to sell new beans at a big discount to the old, which is as much as $3 dollars. They must be recognized as two different crops for two different times.
If we raise a big bean crop, we will regret passing up these opportunities. If the supply remains tight into the new year, we will regret any sales right now.
These are the decisions that are tough, and require discipline. There is no clear answer what is right, only what is prudent.
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