As an official refugee of the 1960s, I remember the iconic, ironic and kind of moronic slogan of the anti-war demonstrators: “What if they gave a war and nobody came?”
I thought of that last week when the U.S. Department of Agriculture gave a report day and nobody came. That is, nobody reacted. No surprise.
The December reports are usually discounted, mostly because USDA puts them out with no new information. Nothing is changed because, if we can just get to January, we can have real final production and usage numbers instead of estimates. The real changes come in the January report.
Of course, that assumes that the USDA can count and wants to count. Most farmers are cynics, and assume that Uncle Sugar has an agenda and can’t be trusted to report honestly. I disagree, but maybe I am just as cynical.
I think they have an agenda, and it is often defending their methodology. Actual accuracy may sometimes take second place. Then again, maybe I am just defending my opinions, and when USDA does not support my opinions, I think they are wrong. Imagine that!
This is the opinion writer’s version of the farmer’s choice of advisor. The farmer reads several marketing letters until he finds one that agrees with him. Then he subscribes to it. In the process, he screens out a lot of information that he needs because he does not like it.
Opinion writers are just the same. I know. I am one.
A couple of years ago, we talked all summer about the horrible crops and how that would all be changed in the January numbers. It was not, and the market did not go along with the joke.
We always preach about how “the market is always right.” In fact, we all love to rant about why it is not, and why we have a handle on the truth. And, we are often slow to change our views to get in line with what the market is trading.
Enough about the opinion business — let’s look at what actually happened last week and why.
For corn, we saw encouraging signs that no news could be good news. That is, nothing much happened, but corn prices were firmer.
We are now engaged in grinding December futures to a halt as far as pricing cash grain and switching to the March contract. As we do that, we are still trying to get whatever the lead futures contract is over the magic $6 number. We are running out of time for it to be the December contract, but it might work with the March contract any day now.
Last week, March corn futures recovered to close up six cents at $5.90. Back on Nov. 24, we had a high of $5.963⁄4. Last week, on Dec. 10, we got to $5.94.
In the process, the March chart continues to define a pennant formation. That is, the short-term uptrend and longer-term downtrend lines are at the point of intersecting. In technical parlance, that means we have to “breakout” either to the upside or the downside.
The bias of the last month or so would have us believe in the uptrend. It is an uptrend that could be shaky because of the psychological strength of the $6 level. That is, if we can get to the $6, we will likely see some knee-jerk selling and need some fundamental reasons to continue the move. Of course, we might not break $6.
The positives for the move higher are the continued strong conditions of corn users. Ethanol producers are minting money.
Beef and hogs are profitable, although more for the processors than the farmers. That is, I see reports that the beef processors, especially, are capturing large margins while only passing part of them on to the producers. The processor argument is likely that all their costs are rising, and they need higher margins.
The soybeans, meanwhile, have been weaker than corn. Some argue that the only real strength in soybeans is the strength in corn that is supporting the beans.
Last week, the January soybean futures contract actually was down almost 30 cents at one point but rallied to close at the high for the week. Unfortunately, that was only a weekly gain of a half-cent.
For soybeans, the problem is exports. The Chinese have not matched their record-buying pace of last year. In fact, exports to them have been weak.
Add to that the idea that soon they will switch origins to the new crop in the southern hemisphere, and it is hard to be bullish the soybeans. Adding to the negativity is the idea that Brazil may have better crops than is now in the USDA projections.
The only bullish idea is that the Chinese prices are so much above ours that there is plenty of incentive to buy our beans. Maybe they are just trying to do it on the dip.
We lost almost $3 between the first week of June and the first week of November. We had only gotten 60-some cents back to our current trade of $12.523⁄4 the morning of Dec. 14.
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