Fundamental news continues to fuel the upturn in futures prices on the Chicago Board of Trade.
Hot, dry South American weather has the markets defensive about corn and soybean prices. The upturn or bounce has maybe become a rally in all three major commodities on the Board.
Corn and beans prices are back to the levels we saw in the middle of November. If you remember, back then we were seeing a contra-seasonal rally as the market fretted about the late harvest and loss of yield to harvest problems.
The crop came off eventually, the traders decided it was still a big one in the bins, and we slid to our lows, wondering what could make us come back.
The answer so far is in the South American weather. Half the world exports of soybeans and a fifth of the exported corn come from there, and we are in that critical period before harvest when the grain is filling.
The fear today is that it is being hurt, and the “winter harvest” will be disappointing to their farmers, encouraging to ours.
March Chicago corn futures are showing a chart that is starting to make sense. The old high was a double, on the 21st of October, then again on the eighth of November.
A double top is a strong signal, and hindsight says we should have thrown in the towel after this one. The 6.74 posted those two days slid most of a dollar to the mid-December low of 56.76 1/2.
At the time of the corn high, we were clutching at straws that the January Inventory Report from Uncle Sugar would give us a surprise, any kind of a surprise that could turn the prices around. Instead, we started the weather talk that has rallied us nine of the last 10 sessions.
The Friday close was 6.46 1/2 after a 6.48 high. That is only 16 cents off the high, with no trading over the long weekend or overnight into Tuesday, Jan. 3.
The soybeans tell a similar tale. We are now the highest we have been since Nov. 8. The old high was in middle October, at 12.89 March futures. The, we dropped most of $2, to the 11.05 1/2 low on Dec. 14.
In two weeks after that we rallied $1.13 1/2 to the end-of-year high of 12.19. The last two days of the year were modestly lower, and we are now 12.07 3/4 and waiting for Tuesday trading.
The March Chicago wheat futures are a little different, with two cycles, but nevertheless, a low the middle of December, than a serious bounce. The high was 6.97 1/4 on Oct. 11. We lost over a dollar to the 5.86 low on Nov. 25.
We bounced to 6.27 1/2 Dec. 5, then made a new low on both the 15th and 16th, at 5.77 1/4. By the 28th, however, we had bounced back to 6.56, just over 40 cents off the October high. We are now 6.51 1/4.
So, prices seem poised to open higher for the new year. The weather market will continue until the prices seem to high for the weather or until the weather changes.
Since we are back near the highs made in harvest on crop fears, it is hard to believe we make new highs. It will take worse fears for the South American crop than we have seen so far to break us into new territory.
Now, if we got a crop-reducing surprise in the Inventory Reports on top of the weather, that might do it. Otherwise, thank the market for the bounce and get some grain sold.
It is the New Year, and it is time.