Marlin: Prices strong during Christmas week

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Standing corn in snow
Farm and Dairy file photo

Prices on the Chicago Board of Trade have remained firm so far in what is traditionally a slow and soft trading week. Trading is usually disrupted when Christmas comes during the week.

We say that the market is “thin” when the number of traders and volume of trades is reduced by holidays that frequently are extended by travel plans to several days. Only those traders not celebrating the holiday, or those staying in town, are available for market discovery on days the market is open.

This year, Christmas comes on Saturday, but there is no trading on Friday, honoring Christmas Eve.

As this was being written Dec. 21, markets were mostly unchanged. March corn futures were unchanged at $5.91. January soybean futures were off a quarter, at $12.923⁄4. March Chicago wheat futures were unchanged.

The three major markets were trading mostly independently. Corn was the strongest, with the uptrend there stalled right now by difficulty breaking through the magic $6 level. That is a level of strong resistance, since producers sell as we get close, and prices back off again as futures are sold to hedge the cash purchases.

The resistance was at $6 in the December futures, but as basis has switched to the March contract with little carry in the price, we are banging on the $6 March level instead.

Since the big low Sept. 10 at $5.063⁄4, we quickly ran prices back up to a high of $5.931⁄2 Nov. 11, then $5.963⁄4 Nov. 24, and then $5.983⁄4 Dec. 17. Notice the pattern. We are getting shorter cycles to each high, and each high is just a little higher until we have just missed the $6.

Corn exports

Corn prices are being supported by strong export sales to our neighboring countries. Both Canada and Mexico are buying corn as their crops were cut by drought. Usage in the currently profitable livestock industry is helping.

Ethanol production is perhaps the biggest support. I was told yesterday that ethanol margins are now commonly $1 per gallon, and in some plants as high as $1.33. Multiply that by what are commonly 80 million-gallon a year production goals, and you can see some real money. Don’t be shy about offering your corn at a few cents push!

Soybeans

The soybean markets have been seen to be somewhat supported by the corn, and not just trading on their own. Prices have been supported by the idea that the South American crops are dwindling in dry conditions.

We also anticipate Chinese sales, which have currently lagged the record pace of last year. We are not seeing actual sales, but the thinking is that the Chinese need the beans and will come for them soon. We have worried that they normally switch origins to Brazil and Argentina when their new crops come in, but this fear is being moderated by the growth in soy fuel.

Some traders believe that soy diesel and now soy jet A is growing enough that the Chinese will continue to buy our beans while they can.

Wheat

And then there are Chicago wheat futures. Wheat prices staged a huge rally in response to the rally in the Minneapolis spring wheat situation. I have commented regularly on the shortage of spring wheat, which has no substitute in world markets.

The lower acres and severe drought-restricted yields and resulted in Minneapolis markets over $10 a bushel. They have firmed there but not really dropped.

As the big move in spring wheat has paused, though, the support for Chicago futures has waned. We are currently trading March Chicago futures at $7.773⁄4. We had a recent low of $6.873⁄4 Sept. 10, and then rallied most of two dollars to $8.743⁄4 Nov. 24.

Since then, we have lost 97 cents. That kind of defines volatility, especially in a market that has a good supply but is just going along for the spring wheat ride.

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