For several months, we have been looking ahead to the USDA Prospective Plantings Report as THE fundamental piece of the marketing puzzle that will provide answers to where this market needs to go.
This week, on Thursday, we finally get the numbers from the government. It remains to be seen if we get the answers.
Corn, corn, corn
Ahead of the report, we have estimates of large increases in corn acres and significant decreases in soybean acres. One private report of 10 days ago put corn acres up 3.5 million, at 91.75 million. It put soybeans down 1.5 million acres, at 75.26.
It should be noted that, before the ethanol boom, acres were at one point close to the same.
As noted last week, this “bearish” corn acreage number sent the market higher, for some reason best rationalized as a reaction to outside markets. It happened to be the day the dollar bottomed out against the Euro.
Will it go down?
The market action of the last month or so, as we anticipate this fundamental news, is hard to sort out.
We have had wickedly volatile prices, and a lack of direction that I can’t understand. It you want understanding, talk to someone who is either smarter or a better liar about the efficacy of his crystal ball. Mine has iced up inside, and the chicken entrails are just a bloody mess right now.
If I had to guess, and you are paying me to do that, I would guess from the viewpoint of a market that is historically high. Thus, it would be easy to expect it to go lower after or just before the reports.
This is based, not on chart study or special insight, but on the old saw that the market goes higher out of fear/anticipation, and that the fear, when relieved Thursday morning, will result in a relaxation of the body and a decline in prices.
May corn futures have traded recently in a range of $1.34. We had a recent high of 7.42 and a recent low of 6.08 only 12 days apart. Now we are trading 6.70, which is 62 cents back off the low. That is not quite half of the move, but in the area of the middle of the range.
May soybean futures have traded a range close to $2 in just over a month. There again, we are a little lower than the middle of the range. Beans have recently been as high as 14.68-7 1/2 and as low as 12.70. This morning, Tuesday overnight, we closed at 13.53, 87 cents off the low.
The Chicago wheat futures are a different story. There, the trend has been mostly sharply lower, with a bounce off the low. We dropped nearly 2.70 from the early February high above 9.25, to 6.56 five weeks later. Now, we have bounced 73 cents to this morning’s 7.29.
While this volatility has been going on, we have seen a variety of reasons for the trade, but the simple view may be correct. This is a trading market, giving the specs opportunities as they got in and out, to make money. It has been a market looking for a home to hang its hat, and that home will get an address on March 31 with the Prospective Plantings Report.
Ah, yes, the weather
After that report will be some kind of reaction, then likely a more stable market until we start getting serious about trading spring weather. There will be a spring weather market because the traders want one. There may or not be spring weather that matters.
The trade continues to fear any reduction of crop caused by weather. A reduction would tighten up the carryout numbers that have already driven corn most of three dollars higher.