Thrown by the ‘urban cowboy’ grain market

The iconic movie of 2002 was Urban Cowboy. This gave us John Travolta posturing in cowboy garb as he hit the night spots in Texas. Central to the movie was the mechanical rodeo bull. I always wondered just how drunk you had to be to get on that thing.

Well, we in the grain business are hanging on with both hands to the mechanical bull market. It goes up, it goes down, and it eventually throws you off on your face.

I remember the disfiguring bump on the nose of my eighth-grade basketball coach. He said he worked his way through college riding rodeo bulls. One night a bull threw him up, then jerked back up to meet him as he came down. The nose was the result.

Trying to hang on

My nose is a little out of joint as I watch price action on the Chicago Board of Trade the last few days. I have been playing the sucker by trying to pick the top. In the process I have been right, then wrong, then really right, then really discouraged.

Prices recovered a little Friday, but the last few days have defined a break in values that has corn down most of a buck and beans down most of two bucks.

I can now stop talking about the report gap on the chart. That gap in trading formed Oct. 11, after a limit up day the Friday before.

USDA had changed crop production numbers down a little, and the market really over-reacted. Well, it seemed like an over-reaction, but since the trading stayed up for a month, I have to remember that my prejudices are not valid. The market is always right.

Up and down

The gap on December corn futures was from 5.28 1/4, the high that Friday after a 30-cent limit gain, to 5.55, the low on the Monday trade. We traded above the gap for more than a month, making a high at 6.05 Nov. 9. We broke prices that day, however, closing at 5.76 1/4. Five of the next six days were sharply lower until we finally closed the gap Nov. 16 with a trade of 5.25 1/2.

The next day we put in the recent low of 5.09, very close to a dollar loss in all.

We are currently trading at 5.21 3/4.

Bean gap still there

The soybeans gapped, but only slightly. The corn chart almost always closes the gap eventually. This is not true of soybeans, and, in fact, the gap is still there.

On January beans, the gap was from 11.45 after a limit 70-cent gain) to 11.61. On the break last week, January soybeans only got down to 11.75 1/4. They are now 12.11 1/2 after a dime bounce overnight going into Monday’s day session.

On Nov. 12, meanwhile, we made a contract high at 13.48 1/2.

Riding the bull

Trying to track this after the fact is fairly simple. Trying to make sense of this price movement is like trying to anticipate whether the bull turns to the left or right.

How much of the volatility is a result of unusual, large spec trades? How much is about the fundamentals of crop size and demand? How much is just the dollar going up and down and effecting our prices when the buying is done in Euros?

I think the same thing about dollars when I pump the Ford full of gasoline. In the last 10 days I have paid $2.959 and also 2.729. Does it have anything to do about gasoline supply and demand? Or, is it just the dollar?

If you are sitting on a pile of grain and have watched $6 corn futures and 13.50 bean futures come and go, you have a lot of company.

I cannot sit here and tell you those prices are coming back. It is easy to say that the current prices are still historically high. That is small comfort, and emphasizes the difficulty of marketing farmer grain.