Marlin: Market retraces after big gains

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Prices of corn and soybeans continued to surge early in the week on the Chicago Board of Trade, with corn futures making new highs. A large correction took most of the gains away, and we closed much lower.

March corn futures actually made the recent low Jan. 3 at $5.843⁄4, but rebounded the morning of Jan. 4 to $5.931⁄2.

March soybeans got down to $13.341⁄2 on the Dec. 30, 45 cents off the high two days before. But, that was only off one and a half cents for the week after the 45-cent gain. Chicago wheat futures lost 44 cents for the week, however.

Party is over

The party seems to be over in wheat, as we have noted previously. The shortage of spring wheat led the markets to a huge rally, putting Minneapolis futures over $10. That move has stalled, and the other two wheat markets have crashed in reaction.

March Chicago wheat futures were trading at $7.641⁄2, up six and a half cents the morning of Jan. 4, but that is a long way from the lofty nearly $8.75 of late November.

Weather reaction. Weather continues to dominate the soybean markets. Give credit to the break-in prices to a break in the drought that dominates Southern Brazil and Argentina. We had light showers in southern Brazil, and the market characteristically overreacted.

The forecasts are still for dry weather, and analysts look now for two million metric ton in production in that region. Look for the U.S. Department of Agriculture to lower their current estimate of 10-12 MMT in the supply and demand report that will come out Jan. 12.

Corn

March corn futures were recovering Jan. 4 after big losses last week. We were up four and a quarter cents at $5.931⁄2 after dipping to $5.843⁄4 Jan. 3. The high came at $6.173⁄4 Dec. 28, so we have a long way to go to recover the losses.

The corn dipped as a reaction to trying the resistance level two or three cents higher and failing. Add to that sympathetic trading with the soybean drop.

The good news in corn continues to be a good ethanol grind which is consuming more corn than USDA projections. Uncle Sugar currently is using a 5.25 billion-bushel grind for ethanol, but some think we could do over 5.6 billion at the rate we are going.

Pent-up demand for driving and high gas prices are supporting high ethanol prices. The high ethanol is giving plants continued great margins, although they have moderated.

China

Working against corn prices is the reality that, even though corn exports continues at a great rate, we will not send as much to China as the record amount last year.

Remember, we never used to sell much corn to China, but, encouraged by need and by fulfillment of our trade agreement, they took tens of millions of bushels last year. We have now entered the doldrums months of grain marketing.

Yes, we had a great chance to sell corn and catch up on corn and bean sales last week, but this normally is a time when the market is looking for news. Sometimes that comes with final production numbers from USDA, which we call “inventory reports.”

We really don’t look for much change there this year. We are a couple of months from the traditional weather markets sparked by talk of dry or wet weather for the next crop. We hang on news of exports and surprises in the planting intentions report of USDA the end of March.

Producers should watch for a corn rebound that gives a second chance to price near the highs of last week. They may perversely hope that their Brazilian cousins continue to suffer dry weather, and that delayed soybean planting in parts of South America will lower the planted second-crop of corn.

This is the time to plan the crops and plan the marketing.

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