After being away the last week finalizing crop insurance decisions with farmers last week, I am ready to get back to my second passion of analyzing commodities and thinking about how to protect prices. Thank you for your patience during this critical time.
Oddly enough, prices the past week behaved as if they knew I would be too busy to notice, so the same trends are still in place for the most part as in my last post. The dollar continued higher for the 5th week in a row while grain prices stabilized.
Ordinarily, one would expect to see the dollar decline into a cycle low before now. The gray area on the chart below indicates a normal cycle timing band. Depending on the charting service you use, Saturday could have been the daily cycle low, but barely. Fridays trade did break the trend line which should confirm that a bottom is being made in the dollar right now, but just barely.
If indeed the dollar cycle bottomed on Friday, I would expect the dollar to continue upward, making a higher high over the next two weeks which won't give much of an opportunity for a rally in the grains. If we can get some follow through and a dollar drop.....say to the 81.30 -85.50 area, we could get the bounce we need to get some substantial grain sales made ahead of the March 28 planting intentions report. Because this cycle has lasted longer than normal, it would not surprise me that the next dollar cycle is shorter than normal.
There are some bullish rumblings out there for the old crop which should lend itself to some support.
· There has been more talk that China is looking for US soybeans due to slow load-out in Brazil
· Nearby corn firmed following Valero’s announcement that they would be running near 100%
capacity in their ethanol sector
· Some rationing concerns are being talked about as early harvest will be later in 2013
· There is some potential frost damage to the Argentine bean crop, yet to be confirmed
Some grain sales targets are forth coming this week.
Grain prices keep working lower. When will this end? When will we get some sort of bounce? Back on the 25th of February, I posted a chart which correlated the recent rapid decline of corn with the dollar. This is still in play. While it is painful to sit through, keep in mind that it is dangerous to chase any run away move once the train has left the station. Just ask the folks that bought Apple Computer stock when it was trading at 700.
All run away moves eventually pull back into a reasonable area because the market will simply run out of buyers. When people stop buying the dollar, the big boys will sell their positions, leaving the rest of us who bought the dollar or sold our commodities holding the bag. That is the way it has always worked in the past and it is the way it always will work in the future. Look at how oil, gold, silver and most any other commodity have traded recently. This is the same dollar chart I posted last week with the corn against the entire commodity complex.
We can credit all the bad news you have read to price action you want, but the bottom line is that this is about money flows.
The fundamentals on wheat however continue to deteriorate. USDA Chief Economist Glauber is forecasting a record 13/14 global wheat crop. Despite the poor wheat crop out west, you cannot deny that world wide, there appears to be plenty of wheat.
Just this week, wheat began trading at a lower price than corn. I have never seen this happen. Today, wheat touched the price floor for those who took 80% RP insurance. The chart below shows the wheat chart with corn in magenta laid over the top. Notice how wheat traded right to the $6.86 80% crop crop insurance floor.
My suggestion at this point is to let somebody else get creamed by the big boys and sit on your hands for the time being. If you have an 80% revenue crop insurance policy or better, allow the insurance to carry the risk for you and do what you meant for it to do when you bought it.
For those with old crop beans.....this could be your final chance to get $15.00 beans sold. Prices have touched this level 4 times now since prices broke lower on November 1 and have not yet been able to close above that price.