Lots of things happen over the holidays when grain trading is involved. One day of lost trading can disrupt the flow of futures orders and interrupt the information and trading stream that makes the whole mess work on good days.
The Christmas holiday is the biggest disruption to trading on the Chicago Board of Trade because there is a tendency for traders to blow off the market and take time off.
Everyone needs to do it, and at some point family concerns overwhelm the need to be “in the market.” So, some traders leave town before Christmas and come back after the New Year.
Maybe this effect used to be more pronounced, back when all the trading was done in the pits, with actual pit traders. Now that it is done with computers, a trader can always sneak off to the den to trade a little while the plum pudding is being consumed. The hard core can sneak out of bed in the middle of the night.
That leaves people like me guessing what the result will be.
What we call “thin trading” can result when a lot of traders are out of town. If there is some reason for markets to go higher or lower, the effect can be magnified by the lack of liquidity represented by few traders in action.
So, when markets started lower during the holidays, I heard myself telling customers that this might just be the holiday effect, and the prices would bounce back on Monday.
It would have helped if I had any good reason to believe that. Maybe it is the farmer in me. I just can’t get used to corn under $4.
I keep telling farmers to sell beans, with a clear conscience. I need to buy corn, but I am not passing out advice at these prices.
This price might be all we get, but I don’t want to be remembered for advising sales, even if I am inevitably remembered for being the guy who bought your corn at these prices.
The March corn futures contract has had three cycles higher since the middle of November, but the highs have not gained. That is, we go up, we go down, we go up again. It makes a nice chart, but the prices are not getting better.
On Nov. 9 we had a low of 4.271⁄2. The high came two days later at 4.271⁄2. On Dec. 2, the low was 4.181⁄2. This was also the contract low. The next high came also two days later at 4.391⁄2.
That was a nice two-day swing, but we went back to a 4.201⁄2 low on the 16th.
The next high was on the 23rd, at 4.36, followed by a low of 4.26 on the 27th, then a low of 4.24 today, Monday, Dec. 29.
The best that can be said about this is that we are in a trading range, and need some news to get out of it. The worst that can be said about this is that the highs are getting lower, and that the holiday slump is not being corrected. Maybe the traders are just staying away until Thursday.
Maybe I am wr..wr..wrong and the market is going to make a new low.
For the last couple of weeks I have been saying that only the March Planting Intentions Report from USDA can help this market. My idea has been that I don’t see bullish news anywhere on the horizon. But, I do think that farmers will like $13 soybeans better than $4 corn.
The trouble is, if we look at new crop corn, it is higher than the current market. The new beans are lower. Looking at new cash prices, we have a comparison that is more like $4 corn and $10.50 beans on the farm. Maybe those prices don’t cause a rush to corn acres.
Watching South America
The wild card now is that the South America soybean crop looks to be huge. As this news hits the market, we might hurt bean prices and thus acres. This could help corn prices. Or, it could all already be in the market, and this is as good as we get.
In the ’90s, we had corn below $2 at harvest, and it looked like prices would never recover. In fact, three months later we were 40 cents higher for no good reason except the old saw: The cure for low prices is low prices.
Maybe somewhere on the horizon is a reason for better prices, and we won’t recognize it until it appears in hindsight on the charts.
Then again, maybe that is wishful thinking at its worst.
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