The psychology in the grain and soybean markets has taken on a decidedly bearish tone. Of course once that has occurred, not only does it become difficult to attract new buying interest but participants tend to focus only on the negative elements in the news and probably even give more weight than should be to negative discussions. For example, yesterday one of the reasons sighted for the pressure in corn was that with the dry conditions in the northern and western regions of the Corn Belt that planting could jump to an early start and if that were the case, it could lead to more acreage not to mention that there would also be potential to see fewer acres lost to flooding. Now if that sounds like a real stretch of the imagination for the middle of March, it is because that is a rather large and premature assumption and of course we all know what can happen when we assume too many things. Regardless, reactions like this are just part of human nature within markets and of course the same thing happens with bullish news when the psychology is positive. That said, there certainly is not much positive news around right now and as I have commented many times in the past you need to feed a bull every day if you want it to survive let alone grow.
The corn market appears to have two enemies right now; tough world competition and weak energy prices. We remain at a competitive disadvantage to both Ukrainian and Argentine corn so outside of the normal group of purchasers such as Mexico, Japan and South Korea, no one will be beating down our door for product. Of course the energy situation is well known and this week we have seen crude oil press into lower lows and now appear to have the 2008 lows in sight. Needless to say, this is not a positive for the ethanol business as blenders have already been struggling with margins and with the strength in the dollar and weakness in sugar, Brazilian ethanol could be economically viable as an import once again. All that said, I continue to believe that the corn market has limited downside potential at this point. If it were July 18th and we were faced with the existing story I could become quite a bear but on the 18th of March, I have to believe there is too much risk on the horizon for that kind of a stance.
In beans, it would appear that the overall reality of the world fundamental picture has finally come home to roost. After producing a record crop last year and once we were beyond the logical problems for meal in the fall, the bean market has been supported by one story alone, Chinese buying. It is not that they have stopped buying but we are seeing that shift to a different hemisphere and with their economy slowing, so may their demand. There is one caveat yet in this market as the dissatisfaction with the truckers in Brazil is still high and a strike could temporarily disrupt export trade. Of course the window in which this could happen is narrowing.
Wheat does seem to be the exception. It is not that you can point your finger at any one specific fundamental and say it is bullish but it does appear we have more than factored in the bearish aspects of the fundamentals and there are numerous risk factors on the horizon that could lead to lower world supplies. While that may not be enough of a story to stage anything more than a 10% rally at this point, it should have the bears feeling quite uneasy.Prices for all these markets have bounced overnight but if that is anything more than a dead cat, especially in beans is yet to be determined. At a minimum though, I would expect to see choppy action between now and the reports that will be issued on the 31st of this month.