History made, but not in grains

President Donald J. Trump and President Xi of China met in November 2017, but trade relations soured with the implementation of tariffs after the trade talks failed. (Official White House Photo by Shealah Craighead)

We saw, after a big run-up in fertilizer prices the last few months, the biggest change in fertilizer in one day ever. Ever. Urea futures dropped $123 in one day. Imagine being on the wrong side of that trade!

History was made even as China, a major producer of urea, has its production cut off in an effort to look good at the upcoming Olympics.

It is not good for the Chinese image to have foreigners see how bad their air pollution normally is, so they have shut down fertilizer production which, in their country, is fueled by burning coal. As the Olympics wind down, they will bring production back on line.

The drop in production was ignored last week in the fertilizer price drop, as it is well known to be temporary.

We have long talked about high fertilizer prices meaning that corn prices are not necessarily all that high compared to input costs. Remember, I am the dinosaur who remembers potash in the $60s!

Sadly, this price slump mostly will affect the 2023 crop, which immediately posted a new contract high, giving us a sales opportunity for that year’s production — a good place to start even if it is a lot cheaper than what we are seeing for the 2022 crop.


Corn prices were up 11 cents, both old and new. That would seem like a big deal except that it is within the recent price range, and corn has been struggling to stay near its highs.

For months we talked about the mythical $6 level for corn, starting with prices more like $5. Then, we got it. At the time, corn was leading the markets higher and soybeans were following.

Recently, the focus has been on South American weather, which is seen to limit soybean yields there. The result has been a market which is focused on the soybean rally instead of the corn.

During the last few days corn has, in fact, traded below that $6 benchmark again. We have had a sales opportunity, and it is slipping away.

The sure sign of a top on the markets is volatility that stays below the high. The up-trend in corn that we have seen for a couple of months is now drifting into sideways trading as we look for news to support the highs again.

That news could come in reduced planted acres as the beans have rallied and look more attractive. Later, that news could come with early spring planting weather.

Change in perspective

We are in the news doldrums of winter. Those doldrums could be broken before this is read. The U.S. Department of Agriculture will dump several reports on us which may or may not change our perspective.

We will see new numbers on U.S. and world stocks, U.S. production, wheat acres and South American production. As we digest them, the reaction might not be just the flavor. That is, the strength of the market following the report will depend upon how the market analyses the numbers, not just what they really are.

Are they what is expected? Is there some twist we can put on them? In the absence of more information, the reports could have an outsize reaction.

Looking at the numbers, we see the obvious corn and soybean up-trends, but a corn market that could go anyway from here. A support line is determined by connecting the cycle lows. Those lows have been dramatic until now.

On Oct. 13, March corn futures went down to $5.161⁄4. The market traded lower, and then made a low at $5.571⁄2 Nov. 9. By Nov. 30, we had a low of $5.62-1⁄2. A month later, Dec. 28, the contract high was just missed. We immediately traded lower, with a low of $5.843⁄4 Jan.  3. Jan. 11, as this was being written, we were trading at $6.003⁄4, after closing Jan. 10 a tick under $6.

March soybean futures, meanwhile, have traded at $11.811⁄4 Nov. 9, $12.141⁄4 Nov. 30, $12.371⁄2 Dec. 14, and $13.231⁄4 Dec. 30. The high was $14.051⁄2 Jan. 7. The rally of over $2 has come with the help of wet weather in Northern Brazil and dry weather in Southern Brazil and Argentina.

Now, the effect of those weather problems is being seen as overstated, so we need new news in beans, also.


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