Soybeans continue to lead grain market

It will come as no surprise to someone watching the South American weather reports that the bean prices have been volatile.

First, we are hot and dry. Then, there is a little rain, but it turns out to be disappointing in quantity. Then, we are dry. Now, there is rain in the forecast.

The soybeans seem to be leading the grain complex on the Chicago Board of Trade. On a given day the corn, then the wheat, may or may not follow.

On the ugly report day of Jan. 12, corn was down 40 cents, then continued to go lower. Soybeans, on the other hand, had a range of over 60 cents, but closed “only” 20 1/2 lower. That is, they had a horrible reaction down, but closed above the low.

The beans followed that by going higher the next day, shrugging off the Report Day low by focusing on disappointing rains in South America. The 11 sessions following that bad day down were all higher, or at least had higher highs.

Then came Monday, when we closed March soybeans down 33 1/4. The reason given? Better forecasts for rain in South America.

So, this market is not going away until the crop is finished in the south.

Follow the leader

The corn and wheat futures have been forced to follow the soybeans to an extent. March corn futures made a low a few days after the USDA reports at 5.92 1/2. By Friday, the corn had bounced to 6.45 1/2, two-thirds of the way back to the 6.64 1/4 high we started the year with.

The high did not hold, however. We closed at 6.27 1/2 Monday, but rebounded to 6.39 1/4 on the overnight session going into Tuesday.

March Chicago wheat futures also put in a year-starting high, at 6.70 3/4. The report low was 5.92, a huge drop, but we are back to 6.57 on the overnight as of Tuesday morning, up 12 1/4 overnight.

So, the beans are most sensitive, the others follow.

Is the bounce going into Tuesday another iteration of “Turnaround Tuesday,” or is this merely the day the South American forecasts get us going again?

Time to sell

This observer remains unconvinced that we are going to break the old highs. I consider this a good selling opportunity. We got scared by the break, and regretted not selling before it.

The market rallied into the report. That is always a sales opportunity, but it is hard to fight off the idea that a rally into the report means we are kicking off a big rally. So, we got discouraged by the drop, and now we have a second chance.

The farmers remember the one sale at $7 when the crazy target actually hit. Now, the farmers are reluctant to sell any more until we get back to $7. Chances are they will regret not selling this time, also.