Corn futures lost some ground this week but held above support levels. Soybeans made new highs on March 8 and then closed lower for the week.
Most encouraging, the soybean losses were mostly in the May contract, down 163⁄4 cents, while the new crop November futures were only off three and three-quarters cents.
Best is ahead
Taken together, this is a market that digested the news of the week, took some profits and still stayed firm, acting like the best is ahead of us.
If we look at the structure of the market, we see inversions in corn and especially in soybeans that confirm that there is high demand nearby for a supply that the traders think is tight. This is expressed by futures prices that are inverted. That is, the highest price is the closest month.
That is the reverse of normal. A normal market is some form of a “carrying charge market.” That is, each succeeding futures contract is higher by some part of the actual cost of carrying the corn in storage. This is what pays elevators to store grain. This is what makes a year like this a nightmare for elevators.
In corn on March 16, for example, May futures were at $5.531⁄4, July at $5.403⁄4, September at $4.971⁄2, and new crop December futures were at $4.753⁄4. The first “carry” come to March at $4.831⁄4, with seven and a half cents carry from December to March.
Soybeans are more extreme. The May is $14.161⁄4, the July is $14.07, the August is $13.643⁄4, and the November is at $12.393⁄4. In the case of soybeans, there is also no carry as we go out to January at $12.37 and March at $12.213⁄4.
This is a market that wants the grain now and is afraid of running out this summer. In the case of soybeans, we are already assuming we will be importing beans to crush. Any more sales will represent more bushels we have to import from South America this summer.
Some of the fear of running out of beans is expressed in cash market. I am told that feeders who have been trying to book summer bean meal are being refused.
Let’s look at the numbers
May corn futures made the contract high more than a month ago, at $5.72 on Feb. 9. Since then, we have been down 13 days and up 12 days. This has defined a trading cycle below the high, but above support at around $5.30.
The morning of March 16, we were trading at $5.531⁄4 after a March 15 close of $5.48. The high March 15 was $5.503⁄4. December corn futures were actually down three cents March 16, at $4.753⁄4. This means the spread between the old crop and the new crop is over 70 cents.
The soybean futures, meanwhile, had a high just 10 days ago. May bean futures were $14.60 on March 8 , but were trading at $14.161⁄4 March 16, down over 3 cents. We were up over 6 cents March 15.
Wheat futures have been disappointing. We have been poised for a month for big changes after the freeze in Texas. Instead, we have been put off by a lack of confirmation of damage, especially by the U.S. Department of Agriculture.
As the calendar rolls and the wheat grows, the reality of damage will be apparent, but it is not known if it will be a severe as was once thought.
The May Chicago futures contract high was actually back Jan. 15, at $6.93. We broke to $6.26 Jan. 25, but came back to $6.881⁄2 on the freeze event. We are currently only $6.391⁄4, down five and three quarters.
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