This winter, we have been trading the cycle in corn and soybeans. Prices go up, prices go down, and we talk about them like they are living things instead of just scratches on a chart. As traders look for reasons to go up and down, they look mostly for chart signs as to the limits of the ups and downs.
Recently the bounds of the price movement have been based on the South American soybean crop and seasonal soybean history.
The soybean prices have had a long slide now. They have been mostly lower since the high of 10.88 1/4 on the May futures back on Jan. 18. Looking back, that is the day the real optimism began to die. This Tuesday morning we are trading at 9.96 1/2, down three for the day so far. The low came a week ago at 9.92, nearly a buck off the high.
South American market
The slide came with a change in mood about the southern crop. At one point, we were fighting the idea of large acres in the Southern Hemisphere. Talk was that we would have a bigger crop than last year, even though yields were struggling. It was actually surprising that our prices were staying firm, over $10, with the record crop here before a big crop there.
The change in mood came with the realization that the yields would be better than we thought. Their weather continues to be favorable for production and harvest. As their crop seemed to loom larger, we broke off our pattern of better prices and started the slide.
Maybe the slide has now stopped, and we can be positive again. We have been for a week, but the prospects are limited by the reality of a big new crop in the south.
Actually, we are seeing better prices than the crop size in the south would indicate. Monday we were told that Brazil would put out a crop of 111 mmt. Our prices still stayed firm, losing only a half-cent on the May contract.
This morning, analysts are speculating that the strongest feature of the market is not the big crop in South America, but the strong season tendency for prices to improve between late March and early May.
So, we get back on the horse that just bucked us off and hope the cycle points higher even if the fundamentals of supply and demand may not.
Analysts have frankly stopped talking much about nearby futures. They figure the producers had good prices, and if they missed them, they can catch up at leisure. They are focusing on the November futures. There, the cycle took us 46 cents lower in two weeks, to a 9.87 1/2 low on the 14th. We are now just above that, at 9.92 1/4 this Tuesday morning. We have not gained much, but have so far stayed five days above the low.
The real fear for the new crop is that the March 31st USDA Planting Intentions Report will show a shift of corn acres to soybeans. That means we may only have 10 days to get some new crops sold, and we have already missed the best opportunity.
Soybean exports have improved from awful to pretty bad. This week we moved out 737,000 tons, which was more than expected, but still the second lowest number for the year. Corn exports were good — still behind the USDA projections, but improving for seven weeks in a row.
As we have discussed in this space, the corn market has not been in the same pattern as the soybeans. Instead of the long slide, we have had multiple cycles that until recently were showing bullishness. That is, the highs were getting higher each cycle.
That pattern broke in the old crop May, with the last high a little lower. The December futures, however, maintained the pattern. December corn futures lost 22 1/2 cents on the last cycle, but are now trading 3.85, three and a half cents above the recent low. Monday’s high of 3.92 1/2 was above the last cycle low of 3.88. Nothing to cheer about, but positive.
However, the market is fearing the fact that the big specs are going from net long to net short. Some fear that increased spec pressure could take 30 or 40 cents off the market.