Volatile market struggles, but goes higher

The bullish market that we have been following since the dramatic changes of August was mixed but strong this week.

Old crop corn futures were down for the week, but recovered late in the week to only lose two cents. New crop futures, however, made a new high at $4.811⁄2, and were up almost 11 cents for the week.

Bigger gains were seen in soybean futures. May soybeans were up almost 26 cents for the week, and the November was up 241⁄4 cents. Then, March 8, we saw a new May futures high of $14.531⁄2. That is $1.555 above the recent low of $12.98 posted Jan. 21.

We did not hold that to the close March 8, and on the morning of March 9, we were trading at $14.313⁄4. We did see $14.42 overnight, so it was already a big range for the day.

November soybean futures are a similar story, with new contract highs March 8. The November contract traded to $12.651⁄4, but was trading at $12.47 the morning of March 9, after being at $12.58 overnight.

Pace of exports

Driving the soybean market is the pace of exports. Fueled by the huge volume of sales to China, we have now booked an amazing 98.2% of the USDA export projections for the year, with half the marketing year remaining.

The only way we don’t exceed U.S. Department of Agriculture (USDA) projections at this point is if we sell no more soybeans to any country, or if we see significant cancellations. Yes, the exports aren’t exports until they are loaded, but there is no indication that we have cancellations ahead of us. This means that, even with miniscule exports, the USDA balance sheet is off.

Traders are assuming a carryout for soybeans of 1.1 billion bushels, which is just pipeline supply. This means, if we sell any more beans now, we have to import more this summer for our own crush needs. This tight supply will continue to support the market.

Meanwhile, although the old-crop corn markets were down most of the week, a similar supply situation continues. We have booked nearly 90% of USDA’s corn export projections already.

In both corn and soybeans, an interesting feature of the market is that the speculators, according to the weekly government report, have been lightening up on their long positions. This would normally weaken prices, but the futures markets are fighting off the effect of the change in spec positions.

Yes, this contributed to the corn drop this week, but we fought it off. The beans just kept going up. Think what you want about the speculator thinking. They may be taking profits. They may be picking a top. They may jump right back in if the market does not put in a setback. Or, they may be poised to go long again if there is a setback.

Wheat still okay

Wheat futures, meanwhile, are staving off the negative impact of the low temperatures in Texas and Oklahoma a couple of weeks ago. Currently, Uncle Sugar says that they have still not quantified the damage to the wheat crop.

That is fair, I suppose, since the full extent will not be known until the wheat starts growing well. Nevertheless, I am surprised to not see a more volatile market, since temperatures were low enough to destroy the Texas crop and damage the Oklahoma crop.

Farther north in the Plains, the wheat was still dormant, resisting damage. This may be a bullish feature to the market that will pop up in a couple of weeks, with the unusual warming trend of this week. It is that time of year.

We are waiting for acreage projections, which will be out in three weeks. We need 91 million acres of corn and the same of beans, and we don’t know if that is possible.

We need to get the crops in on time and need to establish them with good weather. All this just to keep the market from being more bullish.

Any kind of glitch in production would leave us poised for an even bigger change in prices for corn and soybeans. Add in the uncertainty in the wheat that is now starting to grow, and we can anticipate a wild summer.