Posted by: usset001 | June 5, 2009

Six months after the grain market lows

Nearby CBOT Corn Futures, Weekly Chart

Nearby CBOT Corn Futures, Weekly Chart

Today is a special day of sorts. It is the six-month anniverary of a major price bottom in grain markets.

Grain prices reached record levels in 2008. The wheat markets peaked in February, with hard red spring wheat leading the way. The March’08 spring wheat futures contract reached the $25 per bushel mark on Febraury 25, 2008. Corn and soybeans peaked later. July’08 corn futures topped out at $7.62 1/2 on June 27, 2008, and Aug’08 soybeans peaked six days later at $16.52 per bushel.

(Adherents to the 11th Commandment of grain marketing take note. The 11th Commandment says, “Thou shall not hold unpriced cash grain in the bin after July 1.”  That was very good advice in 2008. FYI, my calendar says it is the 5th of June. Do you still have some 2008 old crop in the bin?)

Prices started a long and powerful down trend in early July. Prices bottomed out six months ago today, on December 5, 2008. How low did we go? Look at the nearby contracts on December 5, 2008, and compare them to where we stand today, six months later.

Nearby Minneapolis Spring Wheat Futures, Weekly Chart

Nearby Minneapolis Spring Wheat Futures, Weekly Chart

Mar’09 corn futures traded at $3.06 1/2  – nearby corn futures lost 60% of its value in just over 5 months. Today the nearby contract trades near $4.45, a 30% retracement of the move from last years high prices to the December 5 low.

Nearby CBOT Soybean Futures, Weekly Chart

Nearby CBOT Soybean Futures, Weekly Chart

Mar’08 soybean futures traded at $7.80 – less than half the value of early July, 2008. Jul’09 futures are near at $12.25 today. The soybean market has enjoyed a 50% retracement from the early December lows. Soybeans sport the healthiest price recovery. That’s what fewer acres, a poor Argentina crop and strong China demand can do for a market.

Minneapolis March’09 spring wheat futures reached a low of $5.50 per bushel on December 5 (Chicago March’09 and Kansas City March’09 wheat markets also bottomed on December 5, at $5.01 and $4.71 per bushel, respectively). I will avoid using percentages when comparing that figure to the $25 nearby high of just 10 months earlier. Nearby spring wheat futures are trading near the $7.50 mark today, 36% higher than the early December lows.

Here’s the $64,000 question: Does the grain price recovery enjoyed since early December (and most of it occuring in the last 12 weeks) represent the start of another sustained bull market, or is it your basic bear market rally? I’ve been wrong before, but count me in the camp of a bear market rally.


Responses

  1. bear market rally…………..at least for the short term….meaning new crop sales and old crop remaining bushels really need to get marketed in the very near future….longer term perhaps we see inflation….but with the lack of consumptive demand that we have it will be hard to hold these present price levels threw the summer


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: