Grain markets’ wild ride continues in Chicago

Fueled by USDA carryout projections that get smaller every month, corn prices have led the markets higher on the Chicago Board of Trade.

The reality is that supply is going to get tighter as the market year goes on. This is driving corn prices toward the record highs of the 2008 year.

March corn futures made a new high Monday at 7.10 1/2, then dropped nearly 15 cents to close more than a dime lower on the day. Once again, this gives us a chance to think the high is in.

Once again, the reality is that the swing just represents some short-term volatility and may mean nothing.

The new high represents a $1.15 1/2 gain in six weeks for the old-crop corn. It is the highest corn price since the $7.65 posted in June of 2008. That year we had a similar pattern of worrying the carryout down. We had the booming ethanol industry kicking up more demand than anticipated, as more and more plants came on line or were projected to come on line.

All about demand

This year, it is more of the same, as demand is driving the corn wagon. It is hard to believe that this does not stop. As a trader trying to sell corn, it sure feels like this market has to come to an end. When there are no buyers, there is no trading. But, it felt like that in 2008, also.

The end users will contract what they want next week, and there is no opportunity to sell ahead at the high prices, except to sell futures. That exposes us to unlimited margin calls.

Beans off slightly

While the corn futures go higher, the beans have actually traded off for several days. We have been down four days off the Feb. 9 March futures high of 14.55 3/4.

We are currently overnight on Tuesday at 13.97 3/4. That is 58 cents off the high, which used to mean something. Now we just look at it as normal volatility.

Still, it is significant that soybeans are lower, and ran out of steam following corn higher. The last beans low was at 13.64 1/4 near the end of January.

Wheat still sprouting

Wheat futures continue higher, but not every day. Five of seven recent days were higher, and we made the high last Wednesday at 8.93 1/4, more than 70 cents above the Jan. 31 low. We are currently 8.64 1/4 on the March contract.

So, we have some conclusions to me made. Is this the high? I don’t know. Is this high enough to sell grain? Definitely, but it is getting harder to find someone who wants it.

Will we remember this year for a long time? Maybe. The ethanol industry has changed everything, but the prices are now high enough to hurt the energy producers. That is not good long-term.

Meanwhile, we are now within sight of the real fundamental news of the winter, which is the March 31st USDA Planting Intentions Report.

Yesterday, we got a glimmer of hope that the groundhog was right and we will get an early spring. My road melted down to the pavement before the sleet started again in the early evening. The 6-foot snow plow piles will be with us for a month, regardless of weather, but the tile roofs on our house is bare. The avalanches woke us up a few times in the night, and left a pile in front of the garage that requires the all-wheel-drive car to conquer.

I am not looking for any robins just yet.