Odd trading week may hurt rallies


It remains to be seen what the shortened holiday week of trading will do to grain prices. Chicago markets will close Wednesday at noon Central Time and be closed for Christmas.

Corn and wheat have been making new highs. The corn has been helped by strong demand for ethanol, cheap prices, and the rebound effect itself.

Get prices low enough, and they improve like a bungee cord hanging over a bridge. The bigger the body, the bigger the bounce.

Meanwhile, wheat prices have been helped by the political issues in Russia, the drop in oil prices and economic sanctions that have contributed to a gutted ruble, and the Russian decision to stop wheat exports to countries that participate in the sanctions.

There is irony in their reaction to exports. The Russians have India on the approved list, but India announced this week that they are offering wheat for export themselves!

Russian money

The Russian ruble hit an all-time low against the United States when it spiked to 79.9 rubles per dollar last week.

It had been at 40 in October, so that is a huge break. To try to counter this problem the Russians raised internal interest rates from 10.5 percent to 17 percent.

This helped drive the ruble back down to 58.8 to the dollar. I can only imagine what it is like to live in a country with fluctuations like that.

The soybeans have not made new highs like corn and wheat. There the trend is sideways, supported by record exports. We have now shipped more beans than ever before at this point in the marketing year.

Looking at the numbers, March Chicago corn futures are trading at $4.11 (Dec. 22 morning) up a half-cent from the (Dec. 19) close.

The high was Dec. 19 at $4.14., the recent low was 3.77-1/4 in the third, so we have made big gains. December corn futures have gained 31 cents recently.

There the high was $4.37-1/4 on Dec. 19. We are currently trading at $4.34-1/4. Notice that the new crop is higher than the old.

This is consistent with the recent Informa private report that says we will cut corn acres for the 1015 plantings. Informa is looking for 88 million acres.

That happens to be the 10-year average, bt is down 2.9 million acres from last year. Corn planting, you may recall, was ratcheted higher in response to ethanol production increases. Now that market is mature, although we saw increases in production recently.

Corn prices

In response, corn prices have sharply declined, if that is a strong enough term for a drop in price to less than half what we got used to. So, we are now seeing corn acres creep lower.

Informa also sees the bean acres increasing to 88.78 million acres. This would get us back to even corn and beans, a level we reached a few years ago when beans were favored over corn, before the ethanol blowup.

It should be noted that USDA is now estimating soybeans at only 84 million acres, so there is more news and more market reactions to come. The wheat market has been the big playground for the bulls recently.

Wheat prices

The March contract spiked to $6.77 Dec. 19, before losing steam and closing at $6.55-1/4. The news that Russia would curtail exports is helping the market be up over six cents today, at $6.38-3/4. Wheat has put in steady increases since the contract low of $4.80 on Sept. 25th.

Count it up — that is most of two dollars in three months. These revisions is price should have farmers thinking of rewarding the market with sales. Except for wheat, the grains are not really showing bullishness, but recovery.

Farmers like to move grain after the first of the year, and these prices give a good reason to continue that practice. They are a disappointment after the prices of last year, but they are a pleasant reality after the truly ugly prices at harvest.

Get our Top Stories in Your Inbox

Next step: Check your inbox to confirm your subscription.



We are glad you have chosen to leave a comment. Please keep in mind that comments are moderated according to our comment policy.

Receive emails as this discussion progresses.