Predicting the grain market yields a lot of mistakes

wheat field, Lake Erie, water quality,
(Farm and Dairy file photo)

Parshall Brown milked cows a mile from my home when I was a teenager. In those years, I delivered ear corn four days a week to the feed mill in Jefferson, where I frequently got to visit with him.

It was there I heard one of those great items of wisdom that was so perfect that it has stayed with me for the last 50 years.

“I am an expert at feeding cows,” Brown said. “I know all there is to know about feeding cows. (wait for it, here it comes) I have gone broke three times feeding cows!”

It has taken most of those 50 years, but I am pretty close to knowing now what he knew then, only about grain. I am one of the leading local experts on grain. I must be.

I’ve been writing about it for nearly 30 years in the Farm and Dairy. I’ve only gone broke two times, but they were doozies!

I started buying and selling grain in 1970 while I was still in college. Since then I have seen droughts and floods, bad weather markets and good weather markets, phony markets and real markets and even one nuclear disaster market.

In the process I have made every mistake I can think of, and most of them I repeated. I sometimes think I repeated some of them just for the pure cussedness of proving I was wrong the first time, too!

Predicting tomorrow

In the process, I have learned nearly everything there is to know about trading grain, except how to predict what will happen tomorrow, or even later today for that fact. Take Monday, June 28, for example.

Soybeans have been down more than $1.13 in recent days. When they suddenly turned higher in early trading, I started looking for reasons. When they got to be thirty cents higher, I got serious. Well, it was Monday after a bad week and a decline of 23 cents Friday. This was just a bounce because we got too low.

Then, as the market continued higher Monday, I started thinking about the weather. After today, we are due for hot, dry weather. Is this the next phase of the summer weather market? We were higher on drought talk a couple of weeks ago, but that rally went away when traders started getting serious about how wet the drought was.

Now it is Tuesday morning, June 28. Yesterday, we finished the day with November soybeans up more than 26 cents. This morning so far, we are up 28 cents. We are trading $11.323⁄4, November futures after a low of $10.721⁄2 on Friday.

Corn market

The most notable feature of Monday’s trading was that corn was unchanged at the close, even with the big gains in beans. In early Tuesday trading, the pressure for corn to improve with beans being higher again was simply too much.

Corn is now up a dime or so. A dime is a big deal, but in this case it is just a good start. Reminds me of that old lawyer joke. What do you call one lawyer lying dead in the road? A good start.

Corn is just a good start because we have fallen so low, maybe proportionately even farther than soybeans. December futures put in seven highs above $4.40, with the big high at $4.44 on June 15.

What followed was ugly

We had four days down that got us to a low of $3.78 on June 24. This Tuesday, the 28th, we are up nearly a dime in early trading, at $4.033⁄4. That is 40 cents still off the high after a big rebound.

Looking ahead. Now the hard part. What happens from here? The weather gurus seem to agree that we have high temperatures ahead of us, but good moisture.

That would actually push the corn along, if the moisture is adequate. That would maybe stress the beans a little, but they are looking good. Thursday we get the USDA June 1 Stocks and Planted Acres.

We could get some revision in prices from that, especially since we have broken prices so badly. Even with the gains in soybeans, it would be easy for prices to improve.

The challenge is the calendar. Bull markets are fed by fear, and the high prices come in anticipation of trouble. This is why the actual contract highs come before the actual crop problems.

Magic day

As a result, weather highs tend to come in the end of June. Farmers will tell you the magic day is July 4, but since corn almost always gives us a second chance, the early July high is generally a confirmation of a late June high.

So, from my many years of experience, which is worth just about what I have earned from it, I have to say that the highs are in already, or we have just a few days to get back to them and maybe make new ones.

It would take a significant rally to get back to the highs, so my guess is that the best the Thursday reports could do is confirm the highs. We do, once in a long time, get a late summer high, but one should never bet the farm on it.


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