It is hard to tell until after the fact just when a bump in the market becomes an actual rally. Sometime in the last few days, it must have happened.
Now we have to wonder if it is over, or if this is the start of something good.
All three major commodities on the Chicago Board of Trade have shown signs of an uptrend for a few weeks. Even though we are weaker this morning (Tuesday, Feb. 25), it is nothing serious.
Corn futures have gained 45 cents in six weeks. The soybeans are up almost $1.30 in three weeks. Even wheat futures, which have eased lower for months, have posted serious gains. March Chicago wheat is up 70 cents since the end of January.
What’s going on?
It is very difficult to predict these price moves. It is fairly difficult to even explain them after the fact.
Sometimes it seems that price movement is seasonal. That is, this is the time when we are getting away from harvest and prices often turn higher. Sometimes it seems that price moves come just from natural motion. Prices got cheap, and the cure for cheap prices is cheap prices.
At some point, the buyers start to think the bargains might get away, so they start covering. That results in a spurt in prices, which inspires more buying.
Fundamentals
Then, we have the fundamental changes. We got a surprise Jan. 10, when USDA cut the final crop size instead of increasing it one more time. We have since had Supply and Demand reports that have cut carryout numbers in corn (but not in soybeans).
What we have not seen is the kind of news or momentum like we have seen push prices the last three years. There does not appear to be a magic market on the horizon.
The ethanol market, which fed the last boom, is now mature. We now plug along, providing 5 billion bushels a year to this 300-pound gorilla in the room, but the gorilla is not growing.
Switching to beans?
Next on the fundamental horizon is the March 31 USDA Planting Inventions Report. We are arguing this ahead of time, and have reasons why we should plant more beans or more corn.
I was told yesterday that seed dealers are flush with seed corn, and they are implying there is a switch to beans going on. That could be true, or they could be just trying to move inventory after they produced a huge crop just like everybody else.
I look at the market and say I would rather grow soybeans, with a smaller cost of production to risk and a good price I can lock in.
One local farmer, however, tells me they have a trend of high yields for corn, and the bean yields have not increased in the same way. Thus, he feels he has an advantage in net dollars with soybeans.
In northcentral Ohio, we have a lot of farmers who might want to grow corn, but they have overplanted corn for two or three years and just have to get back to a rotation.
Then you have the farmers who are locked into a corn-bean rotation and plant half and half no matter what.
In another month or so, we will know the answer to the plantings question. Then we will start agonizing about spring, then summer, weather.
Those are the next fundamentals. When the summer is over, we may be able to look back and explain why the market acted as it did. Maybe.
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