Grain traders deal with the ice cream cone market

farmer in wheat field

Trading on the grain futures markets the last few months reminds me of a kid who is not sure about his ice cream cone.

Dad has promised one when they get to their destination, but he keeps driving and the kid is getting worried. For a while, he feared that he might get stuck with chocolate when he really wanted butterscotch ripple. Now he is starting to think he might not get a cone at all.

The much talked about trade deal with China is the ice cream cone in this example. We were told at the end of November that we would get the cone at the end of the journey, which would happen by the end of February. Now we are well into April, and there is no cone, ah, no trade deal.

We have heard a lot of talk in the meantime. Hopes spring eternal that the rumors are true and we would get the butterscotch ripple version. That would be $60 billion of agricultural products sold each year for six years. That would be several times the rate we were doing before the trade war started, and actually stretches credulity as to what would go into it to get us to a level that high.

We have even been told that the ag part of the deal is settled, we are just struggling with other matters. How do we enforce the deal? Will the Chinese agree that they are intellectual property thieves?

(Diplomacy would require that we not actually use the term “thieves.” There is apparently a diplomatspeak word for a government that encourages the systematic permanent borrowing of something without paying for it. Find that term, and the deal is done! Bob’s your uncle, as the Brits say.)

The end of March came, and the grain market decided that maybe the ice cream cone would never happen. May corn futures made a new life-of-contract low, at 3.56. We lost 17 1/2 cents on March 29, the day the cone went away.

Hope came back in a few days, as we started to think of accepting the chocolate version with an April 4 high of 3.66 1/4. That hope faded, and we saw a new contract low April 9 at 3.55 1/4. Currently, we are trading at 3.61, down one and three quarters.

The December corn futures did not see a new low, but showed similar chart damage. The December futures low come at 3.84 1/4. We are now (Tuesday morning) trading 3.88 3/4, down two cents from Monday.

Soybean prices were not as dramatic, but followed suit. The low came March 29 at 9.18, with a chocolate rebound to 9.40 1/4 on April 4. This morning, Tuesday the 16th, we are trading 9.28 1/4, down almost three cents.

The new corn low came as speculative funds increased their record short position to a new record 295,000 contracts. That represents almost 1.5 billion bushels. The good news is that as they added to their short positions the market did not budge much. That may indicate support in the market.

The better news is that funds are fickle, and any good news could have them reversing positions and making a rally bigger and faster.

There is sort of good news out there. The market is now starting to talk about delayed planting. Of course, this is not good for the producer in the matter of production, but it could help price. It will not actually be expressed in the price for a couple of weeks yet, but the idea is out there.

Talk to farmers across the Midwest and you find very little planting. Some areas would start this week, and report conditions almost ready, but rain is forecast. Some in the Upper Midwest are struggling with the 1 to 2 feet of snow dumped on them last week in a late storm. The common theme is that spring planting starts in May.

Locally, we have been record dry, but with most farmers thinking it is too early to plant just yet. A severe thunderstorm Sunday night over most of Northern Ohio dumped one to two inches of rain in a half-hour, which means that thinking of planting is delayed to a more comfortable time on the calendar.


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