Well, golly, there wasn’t bad news in the U.S. Department of Agriculture’s reports today and there was stuff seen as generally good news, so up, up, up we’ve gone. Then settled back a bit.
But most ag commodities haven’t locked limit up, so we can’t assume it’s nowhere but up from here. Still, the charts look mighty nice today to anyone holding unpriced crop.
Here’s a three day canola chart:
That’s a nice jump into new contract highs and 29 month price highs.
Check out corn and soybeans here in these charts that reach back to late September:
To me those hold out the tantalizing possibility that corn – the cereal and feedgrains price leader – might have ended the recent settling back period, and that soybeans have similarly broken out of a rather flat and rangy period. (Earlier today corn had gone limit-up, but now seems to have settled back a bit. Soybeans have surged toward limit-up levels now, but the trading day isn’t done yet.)
How about oats?
Ditto the corn and soybeans situation.
Let me show today’s market impact on the best proxy I know for world grain and oilseed commodity prices:
The Deutsche Bank Agriculture commodity exchange traded fund holds futures of soybeans, corn, winter wheat and sugar as a way of approximating the price moves of the world’s main traded crops, and today it “gapped up,” meaning it opened and stayed well above its recent trading range. It created a gap on the chart, as you can see there. That’s a nice sign of strength for a bull market in ags that has gone on for a long time already. (Unless it gaps down again soon, which would be a signal of a terminal reversal, my textbooks tell me.)
I love the DBA, and I play around with charts for it quite often. Here’s a chart of DBA with three measures I like using for showing the strength of trends.
All three of the measures used here – Bollinger bands, a 20-day moving average and a 50-day moving average – tell me the ags are in a powerful upwards trend. I love the way the DBA repeatedly hugs the upper boundary of the Bollinger bands, occasionally settling back after wandering outside too far. And I enjoy seeing the way that DBA has bounced off the 20-day moving average – including the recent settling back of prices – and when it has broken below the 20-day it has found strength on the 50-day line, bouncing off that and staying within the Bollinger bands.
We’re back up on the upper extreme of the bands now, but still inside and not out in dangerous territory.
So, is this all because of USDA? It’d be nice to be able to make that assumption, but once again the world markets confound us. Overnight there was a powerful rally in Asian and European stock markets, the U.S. stock markets are up nearly a full percent today, and WTI crude oil is up 1.33 percent. So how much is independent ag strength and how much is sympathy with the outside market?
And since I started writing this post, DBA has settled back a bit. Here’s where it has gone since I generated the chart two above:
So who knows where this crazy day will end up when the markets close? That’s still an hour and a half away. But let’s hope – for the sake of farmers with unpriced crops in the bin – that some prices stay near the limits, and gaps like DBA’s hold.
