Gary Hofer: MARKET BULLETS

There is a partisan disagreement in the grain markets. Wheat called for a low and reversal to the upside on March 6. Some observers commented that it was too early in the spring debate season to make such a decisive point. Corn and soybeans, opposing the point with many negative pledges coming in from Latin members, briefly filibustered, then moved to push lower in direct opposition to wheat.

Argentine corn was seen in the lobby at $8 per metric ton below U.S. offerings in the export markets. Soybeans were seen to be organizing a massive fundamental negative vote since their Southern hemisphere crop is abundant. The U.S. dollar, while sympathetic to wheat’s cause, was unable to mount any supportive action until March 17, when it withdrew from police action against the militant Euro-currency, giving wheat more time to gather votes.

In the end, in an attempt to help reconcile the differences in the grain markets, the dollar worked hard to broker harmony in direction by continuing to soften its stance in global markets. Corn and beans finally decided to agree with wheat and shifted back to positive movement on March 18, but wheat, having exhausted itself pushing upward against the majority for so long, failed to be present for the positive vote on Tuesday, and is now wandering somewhere in Georgetown, looking for handouts.

Wheat charts in Chicago are showing what appears to be a swift reversal downward after having bounced up 60 cents per bushel over 13 trading sessions from the low printed on March 6. Tuesday saw May wheat futures contracts drop 10 cents, making a total of 17 cents down from Monday’s high of $5.40. This in the context of steady-to-better beans and corn.

The grains tend to be sympathetic to each other in price movement, although the days when the roar of excitement in one market would cause the others to react in kind are gone with the closing of open outcry trading pits. They still share fundamental price factors, like weather, currency values, animal feeding demand, political risks and overall supply and demand.

The underlying fundamentals of supply for wheat remain neutral to negative for prices. Many areas of northern hemisphere wheat production are receiving at least some rain as we enter the spring growing season. There are areas of drought to be sure, but the overall read at the moment is that the crop will be at least average overall.

Still, this is the “silly season”, and the market is very sensitive to threats, if not reality. We enter the spring with plenty of global wheat supply, but the big trading funds are holding moderately large short-sold positions, which makes the potential for quick, violent short-covering rallies based on short-term crop weather news. The overall price trading channel remains negative.

Information and opinions contained herein come from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital.