No news is bad news in the grain markets

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sun in corn field
(Metro Creative Services photo)

No news is supposed to be good news. In the news business, news tends to be about negative events — storms, terrorist activity, political intrigue. Hence, if there is nothing to write about, that is good.

In the grain business, no news is often bad news, and it is right now. No news means nothing has sparked the markets. No news means there is no fear of running out of feed or food.

That is where we are right now. We have posted two huge crops back to back, and prices reflect that. The good news was that, even in harvest, soybeans improved in price. That ended recently with a 70-some-cent decline in prices. We saw 9.55 on the March futures contract the 28th of December. It was not a good end to the year.

Little spark

January brought us a little spark in beans, up to 9.77 by the 5th, but a dime of that has gone away. Currently, on this Tuesday morning, Jan. 9, we are trading the March contract at 9.67, down three and a quarter cents.

The corn crop has been worse. We have bounced along near the contract low for months now, with small rallies six or eight cents higher. The 3.60-1⁄2 on Dec. 4 represented nearly 13 cents above the 3.46-1⁄2 low of Dec. 19, but yesterday we were back within a quarter of a cent of the low.

Hurting our prices right now is a market that is waiting for government reports out Friday, and traders that anticipate negative news in them. Right now we look for the corn and the bean crops to be finalized at even higher numbers than what were projected in December.

The reports are the USDA Crop Production annual Summary, which we call the “inventory report.” Also coming is the Dec. 1 Quarterly Stocks and the Winter Wheat Seeding. The Inventory Report is the most critical, although the grain stocks could help or hurt the prices regardless of the Inventory. The inventory report is seen as the first actual count of bushels in storage, as opposed to estimates of crop size.

Foundation of trading

As such, its numbers will be seen as the foundation of trading until something big happens to make this crop size irrelevant. That would have to be planted acres, or spring weather, or some unanticipated world political or geological event.

That is to say, after the report we are looking for a “Chernoble,” or a Krakatoa, or war with North Korea. Otherwise, prices remain stagnant.

That sounds dramatic, so I should just say that, some day prices will be higher, and after they are we will be able to say why. We need a drawdown of stocks or a decrease in production.

The production decrease can come from bad weather or smaller planted acre numbers for corn (which will hurt soybeans). The drawdown of stocks comes from export increases because of cheap prices, or export increases because of crop problems elsewhere.

Contract low

In the meantime, the market worries that the negatives expected in the reports will cause the corn to break the contract low this week ahead of the report. It is a significant event if that happens, but it would also make it easier for the prices to rally from a lower level.

The focus this winter is on South American production problems, in corn and beans. Every recent market weather has talked about dry weather in Argentina that has delayed corn planting.

Now the crop is in, but may be reduced in yield. Today, for the first time, I see talk of dryness in South Africa. Yes, this can affect us.

Yes, this is mostly a market letter author struggling to find something to talk about this winter. I feel his pain.

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