Grain markets: Hesitation in corn uptrend?

The chart is beautiful. Corn goes up, up, up. Except, today, Tuesday, it hasn’t on the overnight.

Every time a big uptrend hesitates, we start looking for signs of a top again. Here we go.

March corn has made higher highs on 22 of the last 29 sessions. Each time, there was only a lower high for one day. That defines a strong uptrend with little sign of a break.

So far, we would have to think that today, Tuesday, before the open, is just another one-day breather. Still, the air is getting a little thin here well above $6.

Remember when…

Just before the New Year a good friend called from the Finger Lakes.

“What do you think?” he wanted to know.

“John,” I told him, ” I am going to tell you something I have said to no one so far. Sell everything you own or have nerve to sell ahead in the next two weeks!”

John is savvy. He knows what his corn costs to grow. He knows history. He knows the agony of watching good prices go away. This is not his first marketing rodeo. He knows if prices go up a buck, he sold well, if not at the top. He also knows the farmer mentality, even if he is one.

He told me he was talking to a neighbor who was sitting on corn about getting sold.

“But what if corn goes up 50 cents more?” the neighbor told him.

I remember $7 corn from 2008. I remember I could not buy any because we, like every other hedged legitimate trader, could not risk the margin calls. When the specs ran things through the roof, the cash corn traders had to sit on the sidelines for three months while corn made a high and crashed.

Here we are again, maybe with plans that allow us to cautiously buy corn, but scared of another dollar a bushel set to Chicago.

Flip side

The corn producers who are afraid to sell should be glad they are not using the corn they produce. How do you make meat with $6.50 corn? How do you make ethanol?

How do you get the user to forward contract when he is spending his time hoping prices go back down before he has to buy anything?

March futures

Looking at the numbers, March corn futures had a low Nov. 23 at 5.20 1/4. As of yesterday, Monday, we were briefly $1.13 3/4 higher, at 6.34. That is amazing, even if we were lower overnight.

The March soybeans had a high at 13.54 1/2 Nov. 12, then dropped to 11.83 five days later. Now, we were 14.09 the first trading day of the year, even though we have faded 28 cents off that on the overnight and through the day yesterday.

March Chicago wheat futures traded to 8.25 on a spike Monday. The close was 8.05 1/2, and we are slipping below that overnight.

Still, two weeks ago, March futures were 7.42. Six weeks ago, we were 6.56!

Volatility in grain prices is the mechanism that allows the producer to lock in good prices. We have seen a lot of volatility, and are at the tops again. It remains to be seen if we will see another round of farmer selling.