Corn and soybeans markets diverge

The week of Nov. 15, in this space, I commented that corn and soybeans, even though farmers are bullish, have actually shown long-term downtrends. In fact, action in corn prices the past three weeks has broken that downtrend. The soybean downtrend continues, with January futures down 19 cents the week of Nov. 15. The corn trend, however, is a little murkier. 

Corn

If you look at the month of November, we are clearly gaining price. The week of Nov. 15 showed us a rally for December futures into the $5.80s, with a high of $5.84 on Nov. 17. The gains did not hold, though, and we actually lost six and a half cents for the week. Early trading Nov. 22 in the morning, as this is written, has us back up to $5.77 for December, up six and a quarter cents. 

So, in one day we have erased the loss from the previous week. December futures made a low of $5.063/4 on Oct. 13, then quickly rebounded to that $5.86 high by Nov. 2. We have been mostly sideways since then, but it feels like a return to the upside. 

Unfortunately, the chart-watcher in me is nervous about all the sideways trades between $5.66 and $5.84. Sideways trading demonstrates a market looking for direction. Corn futures have been supported by good export shipments of corn. 

Markets

We shipped 46 million bushels to destinations other than China. That is the highest loading for the market year so far, but the lack of China shipments is worrisome. Last year we saw record interest from China, and the market wants that to be the new norm. Meanwhile, the Chinese are more interested in soybeans at this time. 

Corn prices are also supported by the fact that the end-users are profitable right now. The beef industry is seeing good profits, and the ethanol crushing is seeing high margins, helped by an increase in gasoline prices. 

We currently have a gas war going at our local stations, at $2.89 a gallon, but I see prices of $3.29 regularly. When you buy it, remember how much of that the American farmer is harvesting! 

Soybeans

January soybeans are starting the week off strongly, also, with a $121/2 cent gain this Monday morning, at $12.75. On Nov. 9, we put in the recent low, at $11.811/4, continuing our downtrend. We actually have been higher since then, but market watchers are mostly negative to soybeans. 

We got as high as $12.891/4 as recently as Nov. 17, a range of over a dollar in eight days. A couple of weeks, however, does not a long-term rally make. So far, consider this a recovery or a retracement. 

The positive in soybean marketing is that the demand for soybean oil remains strong. The negatives are that, according to the U.S. Department of Agriculture, we have more left at the end of the year than expected. And, production and usage projections in the USDA balance sheet would indicate, contrary to our beliefs for several months, we will not end next year as tight in supply as we did this year. 

Acres

Talk around the Midwest is that there may be a war for acres this spring, and that could help the soybeans if we don’t get enough acres. Likely it is the corn that will fight for acres, competing with cotton and spring wheat. 

Wheat prices, even for new crops, are astronomical. The increase in wheat acres will happen more in spring wheat country. Soft red winter wheat areas in the Eastern Corn Belt did not see all the acres planted that were intended because of fall rains. 

Holiday

Harvest went on between raindrops, but planters need drier ground. As usual, the holiday week will disrupt the markets some, but it is hard to project whether that will be positive or negative to prices. 

Trading will be thin the end of the week, as we do not trade on Thursday, and many traders will not be active the rest of the week. I suspect this holiday effect is not as prominent as it used to be since the big volume of trading is not in pits anymore but by computer.