After a long weekend, grain market analysis tougher

Prices are rallying on the Chicago Board of Trade after a long weekend. Monday, Feb. 17, we had the President’s Day holiday, Tuesday we are continuing a rally that added to prices on Friday.

Sometimes it is just the long weekend itself that brings about price change. In this case, there seems to be pent-up demand that was acerbated by the three-day break.

Buzz for beans

Soybeans, for example, had big gains during the day Friday, but actually closed nearly 7 cents lower. During the session we saw a new recent high of 13.56 on the nearby March futures, but we closed at 13.37 1/2.

This morning, Tuesday, we are already up almost 15 cents for the day on the March soybeans, at 13.52 1/4. This is near the high, and evidence the traders are bullish and just sold off to get positions even for the long weekend.

Driving the beans right now is the dry weather in South America which has slightly dropped crop estimates, especially in Argentina. Brazil is farther along and is already a quarter harvested.

Also driving beans is the idea the summer supply of the old crop is going to be tight. USDA did not change its estimate of 150 million bushels of carryover, but some think we could be even tighter than that.

True confession

I have been negative beans, so I am taking some abuse right now from customers I leaned on to sell over the last two weeks (this is for you, Barry!). I have long thought that an emerging large crop in South America, coupled with the chance that farmers will show a switch of some acres from corn to beans in the March 31 USDA Planting Intentions Report, would cap bean prices.

In fact, we have made new recent highs, broken through resistance, and will spend this week defining the soybean market for awhile. If we stay up or even spurt higher, we will hold the market above the old resistance, which now becomes support.

While the old beans are higher, the new beans are also making new highs, but at a level more than $2 lower. November soybeans this morning are at a new recent high, the highest since early January.

We are currently trading 11.38 1/4, which is up almost eight cents for the day.

The big gap between the old and the new reflects the current assumption that the farmers will go out and raise a big crop and get the supplies rolling in again.

Bean meal up

The bean prices have been led by bean meal prices, which is a good thing. The meal is making new contract highs, and leading the bean complex.

We are entering a tricky part of the year. Bad weather and low prices have held back farmer selling of corn. That will likely change as cash flow sales start to get more important and as corn prices have firmed up, inspiring sales.

The result of more sales may be weaker basis. In fact, my worry is that basis will never get to normal levels with a big corn crop in farmer hands.

Even while we talk of the prospect of acres changing from corn to beans, in reality the farmers have already ordered seed and made that decision. The March report may well just make official the switch that may already happen.

On the other hand, I have had analysts tell me that they can make a case for corn over beans. Local farmers have told me that they are achieving relatively better corn yields than bean yields, so they will continue to push corn acres. However, some farmers in north central Ohio have already raised corn two or three years in a row on some acres in response to prices. They feel they have to get back to beans.