Conflicting market news, uncertain markets

It is easier for a market writer to be a reporter right now than to be a commentator or even an analyst. Bits and pieces of news continue to surface, but making sense of market direction based on that news is difficult at best.

The reaction in the corn market from the recent U.S. Department of Agriculture reports is an example. We saw significant bearish news in the increase of expected corn acres reported in the March 31st Prospective Plantings report, but a little bullish news from the slightly decreased report of grain stocks.

The USDA expects a 3.4 million-acre increase in corn. However, the markets started the week strong in corn prices, and then lost the gains and added on losses as the week went on.

Normally, price adjustments coming out of a report are a one-day wonder, so I wonder just what traders were thinking. By the end of the week, they were thinking corn was too high, and we lost 17 cents on old corn, to $6.43 1/2, and almost a dime on new crop corn for the week, to $5.56 3/4.

The news for the soybeans was slightly bullish and bullish. That is, the soybean stocks on hand were slightly less than expected, and the acres were less than expected, but almost exactly the same as last year’s. In this case, the market started the week up and then declined, like with corn.

However, different news brought the same results. Soybeans lost 13 cents in the May contract, to a price of $14.92 1/4. The November futures lost a dime, to $13.09 3/4.

Wheat

May Chicago wheat futures lost 17 cents for the week. This comes as the entire SRW crop seems to be emerging from winter in the best shape in a long time, in contrast to the struggling Hard Red Winter crop in the lower Plains.

At least in the case of wheat, the market makes some sense, although it is hard to understand how we can be cheaper than we were before the Ukraine mess cut their export expectations.

The exports by the Russians off the Black Sea in ports stolen from Ukraine in previous years, and from Russian export facilities has seen changes this week as the 15% of the exports that are managed by three multi-national grain firms has changed management.

As I mentioned last week, Cargill, Viterra and Louis Dreyfus have left the market. They had joint venture agreements, and it seems that the Russian government has forced them out. Presumably they grain will still move, but with Russian companies only.

Planting

This is the time of year that we start focusing on the planting progress. We saw the first USDA report on progress April 10, and there were no surprises. The major states have made no or little progress. I am hearing that there are spots of progress in Southern Illinois and on irrigated land in Nebraska, for example. Some progress may be made by late in the week as many areas will be in the eighties for a couple of days.

The early planting in some cases is a matter of soybeans first, as there has been a trend toward early planting and toward individual farmers with enough help planting corn and soybeans at the same time. I am still getting my head around the idea that you plant beans in April, let alone in early April. The yield results are dominating the thinking, however, and the beans are tougher than we realized, at least in the form of modern varieties.

It is doubtful that there will be a lot of early planting in major areas. I heard a report this morning of snow still melting in southern Minnesota and of two to three feet of snow to get rid of in the Dakotas. The best we can expect is a normal window of planting, although it might get late in the Dakotas since we expect more acres there and a later start because of the snow.

Change in currency

I am hearing more and more about the possible change from the U.S. dollar to the Chinese Yuan as the world’s “reserve” currency. I did not take economics 509, or whatever, but this is all about the fact that we have had the dominant currency in the world for decades.

This means that other nations trade with us based upon our currency. This tends to mean that other countries hoard our dollars to use for trade, making our dollar more valuable. The high value of the dollar is, in the short run, negative to grain export prices. We can sell product more easily with a cheap dollar.

However, much of our direct inputs, such as fertilizer, come from abroad. They get expensive with a cheap dollar. Add in the indirect inputs, and we are better off with a strong currency.

In addition, there are general implications to our economy that have some commentators sounding the alarm about the day the Chinese yuan takes over. It seemed once like that would never happen, but the Saudis are now trading in the yuan, and France is talking about it. Yikes! Who’d a thunk it?

Farmers need to get their heads around their marketing plan for the next couple of months. The tendency is to get involved with production and neglect even thinking about marketing.

We are seeing a lot a volatility, and events that could dramatically change prices are coming on the calendar. May soybean futures have had an 85-cent range in the last two weeks. May corn futures have had a range of almost 30 cents. Nearby bean futures are below $15, and the new crop was down to $12.50 just a few days ago.

The high prices came and went last summer. It remains to be seen if we get a bump back this spring on planting weather or the realization that the USDA balance sheets for both corn and soybeans are tight.