‘Groundhog’ market sees its shadow, waiting for spring

What is it about the grain market that has seemed like watching Groundhog Day? That classic movie, starring Bill Murray and Andie MacDowell, is an ode to things staying the same.

It shows Bill Murray as a weathercaster trapped in a universe where every day is a repeat of the day before. No matter what he does to break the pattern, in the morning the day starts over just the same as the day before. It is a movie about redemption, where nothing changes until the character of the man changes.

My family usually watches the film once a year. We used to have a Groundhog Day party, with Squeeze’s famous cheese dip statue of a groundhog. That tradition has slipped away, but some of the movie memories remain.

I remember Murray driving down the railroad tracks with two drunks, about to meet a train. “I’m thinking he’s going to swerve,” Murray says.

That’s kind of where we are with the grain market these days. Everyone knows the train will stay on the track. Everyone knows the market can stubbornly follow the USDA reports and actual export numbers, rather than follow an individual’s private theories about crop size and projected Chinese business.

Rising market ahead

Nevertheless, I have stubbornly believed, and still do, that the market will go higher as better crop information (defined as numbers that agree with me) comes to the market and as actual exports are reported as going to China.

March corn futures have not actually stayed the same, but they have repeated a known pattern for a month. The range has mostly been between 3.75 and 3.90. Eight times since the first of the year we have traded near 3.75 for a low. Ten times we have traded at or above 3.90.

On Jan. 23, we spiked to 3.94, and it seemed we could see a breakout. The next day we lost 61⁄2 cents. Same old, same old.

Train wreck

March soybean futures, meanwhile, have actually been a train wreck. We have lost almost 90 cents recently. The first trading day of the year saw our March futures high of 9.61 Overnight we traded a low of 8.733⁄4 March futures. Last week we were hoping we could hold support above 8.80.

That hope is gone. Instead of trading a range, like the corn, soybeans have been trading steadily lower with the help of only small sales to China instead of the horde of cargoes that were anticipated, and because of record lows in the Brazilian currency, the real.

The real is easy to explain. It gets cheap, it makes their beans cheap in relation to world currencies, and China and other importers buy from Brazil.

China confusion

The China business is a little harder. If the trade deal is read carefully, there is a 30-day initial period for it to be implemented. That period is coming to a close. It should not have been expected that business would come immediately, but the market acted like it would happen right away. Add to that period the current coronavirus disaster, and you have a market making new lows.

First we had the Lunar New Year, with no one working for a week. Now we have an extended period that could last for some time, when people are actually quarantined, and cannot get to work. Maybe the grain traders are stuck in their apartments.

So, Sunday we survived another Groundhog Day and the Super Bowl on the same day. The Chiefs decisively beat the 49ers, and the groundhogs, both Chuck and Phil, saw their shadows, predicting an early spring.

Today, Feb. 4, grain futures are sharply higher. March corn is up three and a half cents. Soybean futures are up seven cents and better. Some say we are just bouncing off the bottom again.

I think it is the Groundhog Day effect. Spring, and better days in the market, are just ahead.