Ugly correction may be in progress in grain markets

For several weeks, corn prices have lagged while soybeans have seemed to make new highs every day. That changed last week as corn perked up to the highest price since September.

That was the good news.

The bad news is that the corn market has now turned south again. May corn futures finished down over 9 cents Monday, March 19, after a nice run that had farmers raising targets and dreaming of $7 corn.

Overnight heading into Tuesday we have lost an additional 9 cents, so this is an actual turnaround.

Negative chart signal

The technicians are noting that this was a key outside reversal, a very negative chart signal. That means that Monday we traded above Friday’s high, but closed below Friday’s low.

Also notable in the corn market is the inverse in futures which has nearby contract relatively higher compared to the deferred.

This morning, March 20, May futures are a penny higher than July, 40 cents higher than the September, almost a buck higher than December.

This is a market that wants your corn now, or doesn’t want it later, or a combination.

We have not seen a patter like this and this strong for decades. It is part of the reason that some observers are speculating that corn futures could be 3.50 at harvest. Gag!

Following suit

The other grains are also showing negative signs. Soybeans have been suspect for a couple of weeks, but keep surprising me with gains after a couple of times we traded sideways briefly. Now, the beans are down six-and a half cents Monday, followed by a 13-cent drop overnight.

May Chicago wheat futures complete the negative picture, with prices on the May contract off almost 20 cents Monday, with nearly 9 cents of follow-through overnight.

Corn is showing a quick cycle. The recent low was just back on March 9th at 6.31 3/4. Monday the high was 6.75 3/4, at 44-cent gain in 10 days. However, by the end of the day the market was just above the low, closing at 6.63 1/2.

The soybeans have had the longest cycle, since they have been steadily higher for months. The old low was on the 12th of January, at 11.60. Monday we got to 13.78 in early trading. That did not hold, and by the close we were just above the low. For the day we were down seven and a half cents at 13.66 1/2. That represented a key outside reversal day for the beans, also.

The wheat charts have been more cyclical, but the cycles have been getting better. The recent low was on the 8th, at 6.33 1/2 for the May contract. Monday the high was 6.75 1/4 before the drop. The close was 6.52 1/4.

What’s next?

Now we have to hunt for reasons for the reversals, and expectations for the future. The trade is focused on the March 1 Grain Stocks Report, which will be released on March 30. That is, the report tells us the stocks the first of the month.

Private companies are putting out pages of their own ideas as the date for release draws near. In the meantime, we are looking at lowered immediate exports hurting basis at the Gulf, which backs up on us.

The wheat crop is looking better as heavy rains are expected in the hard wheat country. As a result, the wheat prices are defensive. The wheat crop often sees prices bounce around in the winter as the crop is most vulnerable.