What Might a Spring Rally Look Like?

March 21, 2016 05:00 AM
What Might a Spring Rally Look Like?

Is a spring rally already pushing back a bearish market? Some analysts think so, with prices rising for corn, soybeans and wheat. Others believe a rally is coming.

Their advice for farmers is to be ready to sell instead of waiting for a better price.

“We’re seeing a spring rally right now. We’re going through short covering, and we’re at the mercy of speculative positioning,” said Mike North, senior risk management advisor of the Commodity Risk Management Group, in Chicago.

North points to an upswing of 20 cents to 30 cents for corn, 40 cents to 60 cents for soybeans, and 40 cents to 50 cents for wheat.

“Farmers have to respect the fact that the rally is much more compressed,” cautioned North, pointing out that “if a drought is coming, a buy call option is the same as the cost of storage.”

Another trader who sees a spring rally is DuWayne Bosse, owner of Bolt Marketing in Britton, S.D. “We’re seeing a rally right here, right now,” said Bolt. The market movers are mainly large funds getting out of short positions ahead of the March 31 USDA plantings report, according to Bosse.

The rally for corn has it just one cent off a bullish range of $3.90 to $4.20; while soybeans, at $9.14, are closing in on a $9.15 to $9.30 range and Chicago wheat, at $4.75, is within hitting a $4.90 to $5.10 range, in Bosse’s view.

The market has been under pressure from huge bearish bets by funds, weather concerns, strong competition from South America and Ukraine for China, and a worldwide oversupply of old crops. A strong U.S. dollar and cheap crude even has had East Coast farmers buying Argentine grain for feed.

Other analysts, like Ted Seifried, vice president and chief market strategist for Zaner Ag Hedge in Chicago, believe a spring rally will depend on the weather and funds.

“The great commodity funds are short. A powder keg could go off with a really nice rally. The question is, if it gets set up,” Seifried said.

In Seifried’s view, a rally would mean corn at $4.44, soybeans holding steady and July wheat at $5.50.

“The bigger concern is whether El Nino becomes La Nina for the growing season,” said Seifried, A significant rise in temperatures could mean too much rain in April or May and too much heat in June and July.

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Spell Check

Chatsworth, IL
3/22/2016 10:22 PM

  So, who's to blame? Notice that none of the presidential candidates have spent much time on Farm Issues? One, I faintly remember, saying he might buy a farm. Has he? We don't want "no handouts" ...but we do want to be able to feed our families and maybe even send them to college where they might learn something about who to pinch to get us above the cost of production, insurance, mortgages, taxes and maybe even paying for equipment. I've been convinced for years that the paper "farmers", funds and other buyers of our grain and other production could care less if it's a dollar a bushel, just so they can buy on the low and sell on the high. Name of the game in commodities just as it is in the stock market. And how about that old saw, "supply and demand?" The oil cartels happily hold back production. We happily raise our production because we don't want anybody to starve. Somebody knows what buttons to push and I'm sure I don't know who. Somebody please educate me. Better yet, educate the candidates and office holders.

Chappell, NE
3/21/2016 09:14 AM

  Let's talk about a rally as soon as there is one. In the meantime let's talk about these 18th century grain prices and NOTHING BUT these 18th century grain prices.

Western, NE
3/21/2016 09:27 AM

  Kind of tough to get excited about $5.50 wheat when the basis widens the same amount as the increase in futures. Kind of counterproductive don't you think?


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