Mark's Market Talk

Last week the bottom fell out of the grain markets. Monday, we saw higher closes as the trade fought off the bearish report that was released the prior Friday. Then Tuesday hit us upside of the head and suddenly liquidation was in full swing on the board. Last Friday the markets started the day higher, and it appeared we had put a bottom in, but as the day went on everything headed lower. For the week July corn was 32 cents lower while the December contract was 9 lower. The bean trade was worse as July beans lost 83 cents and the November contract finished the week 48 cents lower. To make matters worse export prices out of South America are still lower. I am not sure how the agricultural economy works down south as they normally undercut our prices to keep their export business. I think it is safe to say their government will do whatever it takes to keep money moving, even if no one is making any money. They continue to court more business with China which would leave you thinking they might be the ones with the money in the cookie jar in the first place. Today our new crop prices have zero weather premium built in. Planting has occurred at a record pace and though there are some drought areas the crops are off to a great start. Some of us can remember similar years and for me it is 1983. On the 4^th of July the crop looked great and a month later it was terrible as the rain shut off and the heat went sky high. With the erratic weather patterns, we have been experiencing almost anything may happen. Brazil’s second crop corn is experiencing some stress, but it isn’t enough to help us yet. China continued to cancel corn contracts this week as they see an opportunity to buy cheaper Brazilian corn this summer. Bright spots are hard to find right now but there are a few. Ethanol margins are good, and it is keeping the plants operating at full speed. Bean crush margins are not record high as they were recently, but the plants are still making good money and basis levels have not slipped. This week will tell us if the liquidation is over, and we might see some price stabilization take place. If not, it will take poor weather down the road to push the board higher.