Before the report, grain markets are cautiously higher

Some grain markets were cautiously higher this last week, after a Turnaround Tuesday that sparked small rallies.

Corn and wheat markets tuned around the recent downtrends to put in nice gains. The exception was the soybean futures on the Chicago Board of Trade. There, the March contract put in a high of 9.99 on Tuesday, and closed at 9.87, up 27 1/2.

The gains did not hold, as we are currently trading at 9.75 3/4, down almost 3 cents this Tuesday morning.

Meanwhile, corn and wheat futures on the Board made good gains. Last Tuesday, I reported early trading of corn up 5 1/2 cents on the March contract. We actually finished at 3.85 1/4, up 16 cents, and put in a high at 3.88 1/2.

By Monday this week we had traded as high as 3.91 3/4, and closed within a half-cent of that. In early trading Tuesday we are off a little, just below 3.90.

The March Chicago wheat futures last Tuesday hit 5.15 3/4 before closing at 5.13 3/4. That sparked an upturn to a high of 5.34 on Friday. We are currently 5.26, off 3 3/4.

Report time

The weakness this morning is likely because the market is waiting the latest USDA Supply and Demand Report, which will be released at noon our time.

Traders are being cautious, hoping that recent gains will be confirmed by new news. So, that has the analysts chattering about what to expect.

Once again, I am in the position of writing a weekly column with the big news for the week just out of my gasp. Opinions are easy to come by, but hard to back up sometimes.

Cat’s not dead

Amanda Price in our Ashland office did the best job I saw of wrapping up the Tuesday markets. She said the turn came with a lower U.S. dollar, higher energy markets, oversold markets, and slow farmer selling.

I said that the higher prices might just have been a dead cat bounce. (Even a dead cat will bounce a little.) My theory now seems wrong, since the bounce continued, and got higher for corn and wheat. There seems to be a little life in the corn and wheat cats.

South American beans

The surprise to me is the soybean price. There we have actual fundamental news to spark the market.

We keep seeing successive reports from multiple sources that the Brazilian crop is overestimated. At one time reporters had the crop as high as 95 to 96 million metric tonnes. Last week a crop tour there put the crop at only 93.2 mmt. That helped spark the higher prices Tuesday.

Since then we had AGRural with a 91.9 mmt figure, two mmt below the worst estimate. It would seem that the worse the production number for this South American new crop, the better the price here. However, that has not worked out. We get a one-day jerk up, then the market slips off.

Even with the 91.9 mmt number yesterday, for example, the counter argument was that the projection still represented 3 million metric tonnes more than the record crop of last year. So, maybe the best news still is net negative.

Corn and crude

Corn traded independently of soybeans for the week. It is hard for corn to go up while soybeans go down, but they did. They were helped by a stronger price for crude oil, although the argument should be made that the stronger U.S. dollar hurts prices.

In this case, I think the domestic influence outweighed the world view. That is, stronger crude, with prices back over $50 a barrel, leads to higher gasoline, which tends to help the ethanol price. Higher ethanol can mean higher corn prices.

So, we are weaker this morning, but that could change with the noon reports.

What to watch

The critical numbers in the Supply and Demand Report are the carryouts. That is, what grain volume do we project to have left at the end of the marketing year?

Traders are looking for a corn carryout of 1.879 billion bushels for the U.S. They are looking for bean carryout at 398 million. Anything below that could help the market. Those are the numbers that are keeping grain cheap. We do not have “tight” carry until we get back toward 1 billion corn bushels and 100 million or so bean bushels.

We do not have good prices until we do, and we have no demand projections that would get us there.