Grain markets fight off current news

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One sign of a strong market is when it perseveres even when news that is seen as negative bombards it. Take the current news. It is COVID in the news all the time, as we fight another resurgence of cases.

The COVID news has recently been interrupted by the news of the demonstrations at the Capitol in Washington that have led to discussions of possible impeachment proceedings. This news could be seen as unsettling for the economy and the republic as a whole.

And yet, grain markets are higher and are hanging near the highs made in the last few sessions and rebounding from losses Jan. 11. March corn futures Jan. 12 were up one and a quarter cents, at $4.933⁄4. The high was at $5.023⁄4 Jan. 6. March soybean futures are up 5.75 cents, at $13.781⁄4. The high was Jan. 11, at $13.883⁄4. Chicago wheat is up 12 cents, at $6.463⁄4. The high was Jan. 4, at $6.641⁄2.

Grain news

The current prices indicate a market looking for news to sustain the highs, but looking for grain news, not political news. Traders are looking at a record pace of corn exports to China, and at a declining soybean crop in South America. They are looking at soybean prices pulling acres away from spring wheat. They are looking at a cheap dollar, that may have gotten back to 90 cents, but is still helping exports to be cheap.

Milestones have been reached on this historic rally. We have the highest prices for corn and soybeans of the last six and a half years. Corn has been over the magic $5 level. Beans are “in the teens.” Wheat has been in the high 6’s. Traders are trying to pick a high now. Beans are the strongest commodity, helping corn and wheat higher.

The trading year has a long way to go, with a chance of a demand rally in the summer as we run out of soybeans. The supply and demand projections of the U.S. Department of Agriculture become more dominant in the market.

A new report from USDA will come out just after this is written. It is not thought there will be major changes, but anything can happen. This will represent a final calculation of the 2020 harvest, so it will always be important.

As is the nature of rallies, most traders were surprised. We had given up on the market in July, and then had changes in August that confounded the market. Who could anticipate the derecho, in Iowa, for example. Now we are watching a strong market continue to make new highs and are struggling to see when it ends, before it is too late to price everything.

Most of the focus is now on new crop corn and soybeans, and the old crop is sold. The new crop is so far behind the old in price that the temptation is to do nothing. The worst examples of indecision in pricing happen at the top.

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