So, last week I said the rally was over, but I still hadn’t heard the sounds of It’s Over!, my favorite Roy Orbison song. Then, the market sparked up again. So, now what do I write? That I was correct, because the market appeared to be over, but wasn’t? Or that I was wrong?
Or, that the overnight going into Tuesday morning as this is written is sharply lower, so I was right? The last few days just represented a dead cat bounce?
Take your pick of the rationalizations for my getting ahead of the market, but the reality of the last few days is probably that the outside markets still have control.
Libya, The low dollar, the high price of gold — all are overshadowing the only really big piece of real grain news on the horizon. That, of course, is the March 31 USDA Planting Intentions Report.
The result is that grains had another run up, fueled by the anticipation of high oil prices as the Libyan mess gets worse for the short run, maybe better for the long run.
Adding more fuel was the dollar at the lowest value ever and gold at the high. Those last two amount to the same thing, as gold is a world value that is expressed in high prices in dollars when those dollars are cheap relative to Euros.
At the same time, grain prices increasing in dollars is not the same thing as grain prices increasing in Euros. Maybe the world value of grain is not going up. Maybe that does not matter in the short run as we buy goods here in dollars, but it matters in the long run as the cheap dollar eventually results in higher prices for almost anything, since we are a net importer and a big net importer of important things like crude oil.
Once again we are engaging in gunboat diplomacy, spending $600,000 per Tomahawk to help stabilize the oil nations so that they can get rich at our expense. Of course, I am glad I am not the President. I am really only good at second guessing and pointing the finger after the fact.
Some days I think we should “Drill, Baby, Drill,” and some days I think we should pump the Arabs dry and then let them starve in the dark while we drill for our own oil.
We are still better off than the Brits. Their politics is so confusing that they are pursuing gunboat diplomacy with a ship that was actually on the way home to be scrapped! Hard to use gunboat diplomacy without gunboats!
Just more evidence that the whole world expects Uncle Sugar to foot the bill for the world’s military adventures.
Back to the grain
The corn bounce in May futures was from 6.08 to 6.98 1/2. That is quite a bounce after Marlin says it is over, but it was still 52 cents off the early March high.
Now, after the Monday high, we have an overnight drop of 22 cents, taking the shine off the bounce.
The soybeans are similar, with a 1.15 gain in three days to 13.85 3/4. That is still most of 40 cents off the early March high, and was followed overnight going into Tuesday with a 16-cent drop.
The Chicago wheat has had a worse drop, plunging 2.69 in five weeks, then bouncing 93 cents by Monday’s high. The high did not hold, and a 13 1/2 cent drop has us back at 7.07 1/2.
Against the backdrop of political and economic news we are now trading the first pre-report estimates of acreage. The market is looking at early numbers of 91.75 million acres for corn and 75.26 million acres for beans. This would represent 3.5 million acres increase in corn since last year, and a drop of 1.5 million for the beans.
That could be seen as bearish for corn, but the carryout number has been so worrisome that corn actually made its highs on the day these numbers came out. The soybean numbers would be bullish except that it is expected.
So, the market will play the numbers game until the real report comes out, then they will react.
The excitement will probably be before the report. The last few days are a measure of that excitement.