Corn breakout encouraging; beans lead the way

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soybeans

For several weeks, we have been noting that corn prices were strong for good fundamental reasons, but the beans were stumbling their way a little higher after coming out of a strong downtrend.

The corn was reacting to strong exports to our North American neighbors and to strong demand for ethanol and livestock. The beans were following corn, although there was a change in mood about the crops in South America.

Last week, corn made good gains, but soybeans surged to higher prices on the strength of assumed eventual Chinese demand and thoughts that the southern hemisphere crop was having problems.

Northern provinces of Brazil are getting too much rain, and the fear is that we will be too wet going into what could be a delayed, damaged harvest. At the same time, the southern provinces of Brazil and all of Argentina are too dry — ugly for them, positive for us.

The magic number

For several months, market observers have speculated that the corn futures would eventually break the $6 mark. With everybody watching that level, the projection was hard to fulfill.

We flirted with prices just under $6 for December futures until we stopped trading December as the lead hedge month. Then, we went after the same mark in March futures, which had been a couple of cents higher.

Last week, we finally closed above $6 for the first time in five months, and once we broke through the barrier, we kept going.

We are now in the fourth trading session above the magic $6, and in the middle of the night going into Dec. 28, as this was written by your local insomniac grain market observer, March corn futures were up almost two cents at $6.161⁄2.

For the week, we gained 121⁄2 cents, and we added to that Dec. 27 and 28. December futures gained 7 cents last week. Meanwhile, January soybeans were 463⁄4 cents higher, March futures were 521⁄4 cents higher, and the November was 181⁄4 cents higher. Blame much of the move on a change in attitude by experts who are lowering expected crops by 1 to 2 million metric tons.

In a conversation Dec. 27, I was told that, while the north is close to harvest, the dry south is still planting. In some areas, planting has stopped, waiting for enough rain for germination. Some of the beans planted are not coming up.

The delayed planting has results further out in the calendar, as it becomes hard to get the safrina (double crop) corn planted if the soybeans are late.

Wheat

For the first time in a while, the Chicago wheat futures nearly led the markets at the other exchanges.

Chicago wheat was up 40 cents, Kansas City was up 51 cents, and Minneapolis was up just a dime. It is time to sell some corn, but the soybeans sales can wait on the weather.

I don’t know what to think about wheat. We are very high, and sales must be a good thing. The action until now was focused on the spring wheat, but we may be high enough to see some inter-crop adjustments.

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