Markets rally to recent highs

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Money markets graphic
(Farm and Dairy file photo)

Grain prices on the Chicago Board of Trade have returned to their recent highs. The excitement of the rally has been tempered by the reality that the prices still are not high, and may not make new highs without big news that is not on the horizon.

The next big news could be the March 31st USDA Planting Intentions Report, which is actually on the 29th this year because the 31st is a Saturday.

New territory

The actual numbers traded are striking in that they go just to the edge of new territory, and then pull back. March corn futures traded up a nickel Monday, Feb. 12, putting in a 3.67 high in the process. The recent high was at 3.67 3/4 from Feb. 8. If you look back to the low of 3.45 1/2 from the middle of January, you have a rally of almost 22 cents. We are just a quarter of a cent of the Monday high in early trading this Tuesday morning.

Similarly, March soybean futures traded a high of 10.04 1/4 on Monday, up a huge 18 3/4 cents. The close was at 10.01 3/4, but we came back one and a quarter this morning to be at 10.03 again. The previous high was at 10.04 3/4, so we topped out Monday just a half cent off the old high. For perspective, the low was at 9.44 1/2 on Jan. 12, so we have seen a rally of over 60 cents.

Grain is being sold, targets are being placed in elevator offices all over the country.

The contract high for the March futures was back on Dec. 8, at 10.27, so we have a little room under that high.

Wheat futures

Even wheat futures have followed the pattern of corn and beans. Wheat has a longer-term pattern, but the high of 4.65 Monday was the highest since Oct. 4, when we traded 4.66 1/2. That is a long time coming, and we have now come off the awful 4.10 1/2 low of Dec. 12.

For a couple of months I have been saying that sooner or later we would have higher prices, and that after the fact we would be able to point to why we got them. Now comes the part where I have to produce the reasons.

First, we have been focused on South American weather. Argentina and Brazil have had different problems. They can be summed up by saying that we have continued to have rain where it is too wet, and have continued to stay dry where it is too dry.

Argentina has been too dry, so the beans and the corn production is being limited. Brazil has been too wet, so the harvest is being delayed. The delay is expected to limit the acreage of the following corn crop. This is what they call “second crop,” much like our “double crop” soybeans.

Price bounce

Add to the South American weather the fact that cheap grain is the cure for cheap grain, and maybe we have some reason for a bounce in prices. There is some help from a slightly cheaper dollar and crude oil prices that have slipped below $60 again. The oil price is a mixed blessing.

Cheaper oil leads to lower production costs, but the price of corn is strongly influenced by the price of gasoline, which is dependent on crude prices.

The “second crop” corn reminds me of a four-crop rotation that was being experimented with in India when I lived there back in the dark ages of the Green Revolution. The key was to “relay” the wheat crop.

Transplanting wheat

To get time to get the wheat in the rotation, it was planted in nursery plots in very high populations. Then, when the previous crop was harvested, the wheat was transplanted from the nursery plots by hand. I actually got to do this in the lab portion of a class one day, and it remains a favorite memory.

Only where labor is really cheap would anyone think this were a good idea.

I also remember planting full-season wheat with Wes Beery, my American classmate. I drove a water buffalo while Wes dribbled wheat seed down a funnel and tube that came out behind the sharp stick the buffalo was pulling. At the other end of the field we changed places.

The others students laughed at our crooked rows and the way we drove the buffalo, but after we did it, none of the Indians would.

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