Published: March 27, 2008 12:27 pm            

Grain Angles: Up, down market hard to predict

Originally published in the March 21, 2008, print edition.

The roller coaster ride continues. This is a type of market that is difficult to sell in let alone try to predict the direction from day to day. The daily trading ranges seem to be getting wider. The soybean price range has been from $2.50 to $3 in the last month. The corn price range continues to be higher in the face of soybean prices being volatile.

May soybeans are down $1.84 in the last two weeks compared to the previous two weeks being up $1.45. Today May soybeans are down 39 cents compared to a month ago. New crop November soybeans are down 38 cents in the last month, with a range of being down $1.47 cents compared to the previous two weeks of being up $1.09 cents.

The soybean basis is also getting wider. The spring basis has widened 8 to 11 cents while new crop has widened out 26 cents. The southern Minnesota location I watch for soybean basis has all months over $1 per bushel, with new crop at $1.43.

Corn continues to surge higher. May corn is up 32 cents in the last month and 49 cents since mid-January. December new crop corn is up 37 cents in the last month and up 60 cents since mid-January. The corn basis is widening just like soybeans but not at the pace of soybeans. May corn has moved 4 cents in the last month while June and July corn have moved 8 cents in the same time period. The corn market has done nothing but move higher since last October which is not normal; this is a demand market, however, and normal does not count right now.

The Chicago Board of Trade is changing the trading limits for corn and soybeans on March 28. The corn trading range will then be 30 cents and soybeans will be 70 cents compared to the current limits of 20 and 50 cents respectively. This will provide for some more fireworks as the daily price swings could get even more volatile than they have been. The index funds have been at work also in the marketplace. The index funds are long in the market and have accumulated several billion bushels of long positions in corn, soybeans and wheat. When you add in the commodity funds that can be long and short in the market, the combination of funds is clearly in control.

It is important to be in a position to do some selling in this type of market. Most markets have reached all-time highs and we do not stay at those levels very long. Basis levels have gotten wide because many grain buyers are not willing to buy grain right now. Cargill and ADM are two of the major grain buyers who have changed their grain-buying positions drastically in the last couple of weeks.

Remember that when anyone is buying grain they will hedge that grain and right now there are billions of dollars tied up in margin accounts which have the grain business pretty well tapped out of cash. Many producers have sold grain at much lower prices which means the elevators have been margining that grain all the way through this incredible run up.

        

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