Depressed grain markets, depressed farmers

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wet field, corn, delayed planting, Ohio farm,
(Farm and Dairy photo)

Some days, grain traders who are naturally long the market have a hard time looking at the price charts. Farmers, who by nature are always long the market, have to take a gulp before they go to the computer or the paper to look at current prices.

Times have been tough on corn, soybean, and wheat prices. The wheat is depressed beyond belief. The corn and soybeans make regular new life-of-contract lows, no matter how much we talk about the coming impact of a huge deal with China.

The market frankly has gotten so tired of talking about Chinese business that it is trading futures currently as if there is no deal in sight. There is the chance they are right.

The end of November, on the sidelines of multi-national meetings in Argentina, representatives of the U.S. and China agreed to agree. That is, they entered an agreed-upon period of three months to wring out a comprehensive trade deal between the two countries.

Although we in the agriculture business focus on the grain part of it, the trade accord would include all products. There seems to be agreement on the grain portions, and rumors have been floated that are generally believed. There would seem to be a tripling of agricultural trade to the level of around $50 billion a year. That would require not just soybeans, but also corn, feeds and meats to reach that level.

And, yet, prices have continued to drop, especially in the last two months. Perhaps that is because the March 1 target has come and gone, and talk is cheap.

This week our Treasury Secretary and chief negotiator are in China. We are told that there is anticipation that the presidents of the two countries would meet for a signing around Memorial Day. Or not.

The uncertainty has left the market defensive, then reeling.

According to rumor, the problems come in negotiating the Chinese theft of intellectual property and the enforcement of the agreement. We have waited until we are starting to give up, if you believe what is happening on the Chicago Board of Trade.

Corn prices, especially, have shown the effect of what has become negative news. The spec funds have added to record short positions three weeks in a row. They have shorted soybeans to near-record levels. The result is a new low for December corn futures last week at 3.71 3/4, more than 30 cents off the recent high of 4.02 1/2 made on March 25. November soybeans made a new low at 8.80 1/2 Monday of this week.

Sliver of silver lining

Now, the good news. We are staging the market for a big rally, depending upon events of the next few weeks. Last week’s trading put in a huge chart technical signal in the corn.

Called an exhaustion tail, the markets traded sharply lower Thursday, then recovered. The result was a “tail” on the chart where we traded 8 cents lower on December futures, then reversed and closed almost 6 cents off the low. That resulted in an actual gain for the day, and it was followed by gains the next three days. We are near 3.82 this Tuesday morning as this is written.

Add to this technical signal the fact that we are entering a period of delayed planting that has every sign of continuing. The U.S. is normally at 27 percent planted on corn as of Sunday night a few days ago. We are now at 15 percent nationally, and Ohio has only planted 2 percent, up from one last week.

In my weekly conference call with 20 other Russell associates across the Midwest, the trend was clear. There are dry spots where the crop is getting in on time. For the most part, however, planting is hardly started or not started at all. And, rain is forecast all week.

We expect planting to be seriously delayed by the next USDA Crop Progress Report, released next Monday. If the delayed planting continues and there is finally good trade news, we are off to the races.

 

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