Grain markets: The party’s getting old in Chicago

All those old cliches come to mind. Stick a fork in it — it’s done! The party’s over! And a reminder of the ugliest graffiti from Saigon, circa 1974: “Would the last American in Vietnam please turn out the light at the end of the tunnel!”

I think of those sayings as I study the grain charts this morning. Prices have turned, not just sharply lower, but ugly lower.

It looks like the big move is over, with big losses in the last few days and weeks.

I am reminded of one of the strong axioms of this business: The top is in when everyone thinks prices have to go higher. That was the mood only a few days ago.

All the talk was about how tight the carryout in corn was getting. Traders were spooked that we could have a spotty spring, take a little off the corn crop, and make new highs in corn by dollars, not cents.

Global shift

So, what has changed? All the outside markets seemed to be helping grain prices. The weak dollar, the high crude price, the Libyan situation were all cited as reasons for high prices. To my mind, nothing has changed there. We have just stopped getting new news to feed the bull.

Now, the focus of the world is on Japan and the catastrophe there: 10,000 people may be dead, and two nuclear reactors are still threatening to melt down. A million people are homeless, and the best we can say is that the Japanese are used to handling these problems and at least it is not as bad as the Indonesian tsunami. No, it is not. Maybe 200,000 died in that one.

And, we now try to decide if the Japanese mess should effect prices. I don’t know.

I don’t know why we went up so high and down so hard, either. I am just trying to rationalize it after the fact.

The numbers

Let’s look at the actual numbers. The May corn futures dropped 17 1/4 cents last night (March 14), going into Tuesday morning. We closed on the low, at 6.48. That is most of a dollar below the high made three weeks ago.

Of course, that high was a fluke. We made a low the same day, 40 cents off the high of 7.44 1/4.

At the same time, the soybeans were crashing, but have actually been better the last two days. May bean futures were at 14.67 1/2 in early February. In two weeks, they dropped to 12.96 1/4. The next two weeks took them back to 14.24 1/2. Now, we had a Friday low of 13.05. So, we were down $1.71, then up $1.28, then down $1.19. That pretty well defines volatility.

The wheat market has been easier to chart, but more confusing. All the talk has been about tight world-wide supply. So, of course we crash. May wheat futures are down $2.31 1/4 as of this morning, to 6.94/1/4.

Someone has to explain that one to me. Did we just get too high, whatever the supply?

Fat lady’s mumStill

, I keep listening for the sound of my all-time favorite market song. That would be, It’s Over! I don’t hear it, and I am not totally convinced until I do.

What if the specs were right, before they gave up for now? What if we have some spring problems? Maybe, from this height, it will just bring the new crop up to even with the old. Maybe corn futures are losing their convergence with futures, like wheat did a couple of years ago.

A lot of questions, and not too many answers.