Discouraged bulls look for direction in grain market

The most memorable remark of the last week came from my associate Mark Trenchard in the Ashland office.

Like me, he has been in the business a long time. Like me, he tends to be a realist.

“Just be careful,” he said. “This could go a lot lower.”

I remember that as I watch the market make new lows and go sharply lower overnight. I remember that as I talk to a farmer this morning. “What happened to the $7 corn?” he asked, rhetorically.

No news

The marketing ship is rudderless this month, as fundamental news is mostly absent and meaningless.

The harvest is over, even if you have some corn waiting for a miracle or frozen ground. The market considers it over. There is no news until the January Inventory Report from USDA, and that might not have any reason for hope. Prices have drifted lower, and traders so little to inspire higher prices on the horizon.

Market news is once again all about the outside markets, as we look for reasons for price change. The outside markets are a mix of optimism and despair this morning (Tuesday, Dec. 6).

Standard and Poor is said to be getting ready to downgrade the debt of the 15 euro-zone member countries. The dollar is higher, mostly as a result. The European problems make our economy look better in comparison.

The Dow was up 78 points Monday, and added 45 points overnight. Crude oil was up 23 cents, and the Brent crude was up 43 cents. Gold was lower. Consider lower gold a good thing, as it is more a measure of a better dollar.

No grain talk

Nowhere in there is any actual talk of grain. The prices are sharply lower overnight, led my corn futures which are down over 8 cents. That gives us a new recent low, at 5.72 December futures. The recent high was a month ago, at 6.65.

In two weeks, we crashed to 5.80 1/2, then we bounced by Nov. 30 to 6.09. Monday we were back down to 5.80 1/4, a quarter lower than the Nov. 25 low.

Soybeans have been more of a steady decline since early harvest. There have been a couple of ripples higher, but they did not amount to much. The recent high was back on Oct. 14, at 12.82 January futures. We lost $1.77 1/2 from then until the Nov. 25 low of 11.04 1/2. The next week got us nearly 40 cents higher, but the overnight going into Tuesday this week has us at 11.22 January futures.

Wheat futures have rallied the last few days, but the chart is nearly as bad as corn. The high was early in October, at 6.63. The first of November we were down to 6.14, but we bounced in a week to 6.57 1/2. The Nov. 25 low was at 5.74 1/2. We bounced to 6.12 1/2 on the second, but are back on the overnight close to 5.91. That is down nearly 8 cents overnight.

Now what?

So, where do we go from here? We need news, and now is not the time for news. We need demand, and that is already at a good pace, but not increasing. The ethanol plants are running at capacity, and there is no sign that the closed plants will open.

So, we may drift into the spring with little change, or we could slam lower on European discouragement.

Going higher requires an infusion of cash, one which has been discouraged by the ethical failure embodied in the MF Global meltdown. Getting money into our markets requires traders to be able to believe that “segregated funds” are actually safe.