So with yesterday’s clattering thump, are we still in correction territory, or are we seeing signs of a reversal to the downside?
That’s the crucial question on everyone’s mind.
We’ve seen a gentle sell-off of crop futures in the last week, but yesterday’s sudden slumping has made many draw in their breath.
Here’s what it looked like on the charts for hard red spring wheat, corn, canola and soybean oil May futures.
Things have settled down today, for which everyone on the grains side is happy. This was not the start of a three-day cascade of limit-down trading sessions, the sort of thing we have seen when other roaring grain bull markets have suddenly reversed. This was a bad tremor, but right now prices are not devastated. (Spring wheat futures feel devastated, though, after giving back all of the calendar year’s gains. But those losses were already well underway before this week.)
It’s going to be interesting to hear on Monday what the Canadian Wheat Board makes of all this, and how it affects the 2011-12 Pool Return Guess.
The fact that prices have pulled back from an ever-onwards-and-upwards path won’t surprise many analysts. In fact, I remember doing a story with two or three analysts back in early February in which they expected to see a correction because of the over-bullishness in the market. So until yesterday this recent pullback would have seemed within expectations.
Read Also
Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
But what about yesterday’s selloff? That showed some pretty alarming earthquakey tendencies. That’s a bit more than typical correctiony behavior.
Since a couple of analysts had been calling for a correction, I decided to call them and get their take on it. I’ve spoken to one so far, and he was also unsettled by yesterday’s selloff. Until yesterday, it seemed healthily corrective for a couple of days. But then yesterday the bottom dropped out, and that raises questions about how strong the underlying base of buying is.
“It’s an indication of things under the surface, maybe,” he said.
So we’ll have to wait a few days to see where things go. Today we’re flattish, so the legs haven’t been knocked out from under the market.
Well, we all know what triggered yesterday’s selloff: Moammar Gadhafi’s violent reaction to protests in Libya. But how much of a factor the geopolitical tempestuousness will continue to be remains to be seen.
As we continue to ponder the affect of politics and culture on the grain markets, I leave you with this graphical study of similarities and differences between Gadhafi and the leader of the 1980s new Wave band Devo, a similarly world-shaking personage, as compared by P Daddy:
