Grain markets are trading on rumors, optimism

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soybean field at sunset
Farm and Dairy file photo

It is Tuesday again, and I am struggling to come up with a new way to talk about commodity prices, But prices are stagnant, looking for news. The news is all about trade negotiations with China, and there is no real news.

Prices change based on a general optimism that trade talks will succeed to our favor. Prices are juggled a little depending upon current rumors of talk progress.

Normally in early January, we see fundamental news coming from USDA in the form of final inventory reports, which lock in the actual size of the old crop. We also see some Supply and Demand information, and eventually some preliminary news about new crop planted acres, expected production, and next year’s carryout. That supply of news has been stopped until recently by the partial government shutdown, which included the Department of Agriculture. Some of our January reports will now come out on Feb. 8.

This dominant stagnant news and price condition was predicated by a meeting between representatives of the U.S. and China. (I refuse to refer to it as the Peoples’ Republic, when it is neither controlled by the people nor a republic.) The meeting was on the sideline of the G-20 meeting in Argentina, and took place on Saturday, Dec. 1.

The meeting was in response to trade breaking down between the two countries as we put tariffs on their products and they countered with a 25 percent tariff on our beans. Their response was predictable, as soybeans were our second biggest export to them, after planes and plane parts. And, they got a lot of bang for the buck by hurting Midwest soybean farmers, who mostly had supported President Donald Trump.

Much of the trade discussion is not about grain at all, but about loss of intellectual property to China through theft and through forced joint ventures with any American company that chooses to operated in China. (We would be glad to have to here, and, by the way, all your secrets are now also our secrets.)

At that Argentine meeting, the two parties declared they would continue to meet over the next three months and continue to work toward a long-term trade agreement. That three-month period ends on March 1, depending on how you are counting.

At this point, unless procedures and policies of diplomacy established over the last few hundred years are changed, it would appear that any agreement will come some time in the last day of the three months. That leaves traders with their optimism and rumors.

Some of the rumors are fantastic, but possible. The greatest of these is that we will do $50 billion a year in agricultural trade, and the trade deficit will be cut to zero in six years. One can only dream.

It this rumor is to believed, we would have to export to China large amounts of chicken and pork, along with increasing volumes of grain. This would include cargoes of corn, which would be a new thing.

All I can say is, don’t count your chicken legs before they are shipped to China. They may be hatched, but they may not get shipped to China.

As talks and rumors have progressed, prices for soybeans and corn have been sideways in a narrow band. Soybeans have gotten back to the recent highs on feelings of optimism. This has provided an opportunity to catch up sales at good levels.

Or, if you believe the best rumors, current trading is providing levels to tempt you, but the boom is coming and you should wait for sales. You pay your money and you take your chance.

Soybean prices peaked Friday, then have been lower Monday and Tuesday. Friday March futures traded to 9.26 1/4. That was still below the 9.41 of Dec. 12. Currently we are trading on Tuesday morning at 9.18 1/4. The last low was at 8.91 1/4 on Jan. 16. Looking at the chart, we can draw a line that comes close to the last five lows, starting with 8.39 3/4 on Sept. 18. That means we have strong support at this line, and it is moving higher.

November soybeans show a similar pattern, but we actually passed the last high Friday, reaching 9.64 3/4, a penny higher than the Jan. 9 high. The recent high is 9.71 on Dec. 12.

 

 

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