The rally felt good while it lasted. For more than two weeks we sniffed at better prices, for corn and especially for soybeans, only to see the market break off the rally and take serious losses again.
On the bounce, we cash grain traders did buy significant amounts of soybeans, mostly off targets.
Then, we dropped back out of reach of interesting prices again. The biggest challenge in the rally was to find a good reason why it happened. Focus has been on South American weather being a little tough, and on the dollar being a little weak.
Maybe the biggest factor was that the spec funds lightened up on their short positions, putting a lot of buying into the market. When that fizzled, the market did, too. So-called “managed money” cut their short corn position from 219,676 contracts to 130,902 contracts, a huge difference.
They cut their soybeans short from 81,538 contracts to 21,849. Remember, a contract is 5,000 bushels, so we are talking about enough bushels to turn the market, not just follow it.
Look at numbers
Let’s look at the numbers. March corn futures were as low as 3.45-1⁄2 on Jan. 12. They made a high of 3.62-1⁄2 on Friday, Feb. 2, a 17-cent gain. By this morning they were down over six cents to a 3.56-1⁄4 low before rebounding to 3.59-1⁄4.
March soybeans put in the high in early December at 10.27. We then lost 82 and a half cents by the 9.44-1⁄2 low of Jan. 12. Then came the recent rally, up over 60 cents to 10.04-3⁄4 on Jan. 30.
Since then we have lost 37 cents to an overnight low of 9.67-3⁄4. We bounced off the low to trade the current 9.75.
Quite a ride! While this was going on, March wheat futures made a 4.13-1⁄4 low on Jan. 16, then rallied 45-1⁄2 cents in two weeks. We have now lost 20 cents of the gains, to the 4.41-1⁄2 we are trading this Tuesday, up one and a quarter for the day so far.
The market is a little defensive ahead of Thursday’s USDA Monthly Supply and Demand Report. Nothing big is expected out of it, but it always marks a day of caution in case there is a surprise.
The focus now is on ending stocks, as how fast we use up the last two year’s supply of huge crops is the issue. Currently, traders expect 2.468 billion bushels of ending stocks, versus the 2.477 predicted in the January report.
Not much difference there, but at least it is in the right direction. The trade expects soybean ending stocks to be reported at 486 million bushels, up from 470 in the January report. This is also a small change, but in the wrong direction.
The trade is not focusing on that small change, however, but the continued dryness in Argentina. They are leaning to smaller crops, even as Brazil is expecting normal rainfall. A mixed message there seems to be still leaning toward our help for prices.
The expected ending stocks for all wheat classes is very small, with the trade looking for 990 million bushels after a 989-million bushel report for January. More importantly, light rain and snow are forecast for the Southern Plains this week and next.
More is also expected for the Central Plains. This means we may get a little protective snow cover. It also means we are not getting drastically low temperatures to hurt the crops.
Since China is now such a market-mover, it is significant that they are currently cutting off imports of our DDG’s. This can back up to affect the price for corn at our ethanol plants, as selling the byproducts is a critical part of the value equation.
China is also considering cutting off sorghum imports, which means little to us in the east, but affects the overall feed usage for corn. Sorghum in grown in the West in areas that do not get enough rain for corn.
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