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Fewer bad surprises potential equals higher prices

Every time I take a few days off for holidays, or get sick, the market seems to rally.

Is there a causal connection? Perhaps I should take a few days off every time the market drops or prices trend downwards for too long.

I took last week off to return to Saskatchewan to celebrate my wife’s and my 10th wedding anniversary, spending a couple of days in Wolseley at the hotel in which we were married and then five more in Regina with our moms and my stepfather. On the drive back my two year old daughter developed what seemed like the flu, and in the days since she, my wife and I have been dragging ourselves along in a semi-sick state, not really very sick, but enough to keep us disconnected from everyday life and me from watching the markets. I hope it’s the H1N1 we’re recovering from, because it was pretty darned light and the virulent form of the disease seems  designed to knock off yours truly. (I’m a middle-aged asthmatic, and other than pregnant women that seems the typical fatal victim.)

So it’s been with some pleasant surprise that I see in this period of thanksgiving, sickness and personal distractedness that the market has decisively reversed course from downwards and has risen to levels not seen for months. Will it last? It’s a bit early for the harvest slump to end, but that doesn’t mean it can’t happen. As it said on a Clash T-shirt I wore a lot in high school: The Future Is Unwritten.

Some prognosticators are suggesting the greatest cause of weakness is behind us. The Chicago Mercantile Exchange’s daily news report summed up this end of pessimism in this headline: Big US Corn Crop Done Getting Bigger – Analysts. Damaging frost and continuing wet weather have neutralized a long-lasting belief among traders: “Corn futures traders’ conventional wisdom that ‘a big crop gets bigger’ might be washed away this season by the soggy and cold U.S. corn belt weather so far this fall.”

The actual extent of the damage to corn supplies is minimal, but the market now feels that it’s unlikely that more and more unexpected corn is likely to come to light. That lack of a likelihood of a bad surprise in the future has been enough to make some traders rush back into the market, and to make others cover shorts, causing a rather exciting spike.

Soybeans are shorter in supply than corn and stronger in terms of holding their position. When I checked Chicago soybean prices a few minutes ago, they were at $9.99. Canola’s been rising too, in sympathy, but the musclebound Canadian dollar is holding it well back from where it could be. Still, it’s better to be rising a bit with a strengthening Canadian dollar than it is to be falling a bunch with a rising Canadian dollar.

Pretty well every prairie farmer will be helped by the relief in the wheat markets. Let’s hope more of the Saudi Arabian type buying we heard about recently continues and eats up our portion of a worldwide crop that’s huge.

Oats is the biggest winner in the recent rally.  December 2009 Chicago oats futures are trading at about $2.60. They were at about $2.00 in early September. That’s a 30 percent rise. Nice. Will it stay strong? The low point of the oats market each year ironically tends to coincide with the Prairie Oats Growers Association’s annual convention in the first week of December, so it’s a bit early. But let’s hope Joe Strummer of The Clash got it right on that shirt of mine: The Future is Unwritten, and the bottom of this market could just possibly have been reached.

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