The main grain markets appear to have stopped plunging and are rolling along what farmers must hope will be this year’s floor for prices.
But a longtime Chicago grain trader says it’s too early to consider that the market lows have been reached.
“It’s still a bear market until it breaks out of this range to the upside,” said Rick Alexander of Zaner Group.
“It’s still a bear market. It still hasn’t turned up.”
Since July, and earlier for wheat, the main North American grain markets have been falling, part of the overall massive plunge of commodity prices.
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But since mid-October, most crop futures appear to have reached a plateau, with ups and downs within a relatively tight range.
That has meant that crop futures prices have avoided the worst downs of the stock market since mid-October and appear to have broken free of some other commodities, such as oil. But it has also meant that crop futures missed out on last week’s major rally in the stock market.
That could be a bad sign, and that’s why Alexander says it’s too soon to conclude that the crop commodity bear trend is over.
“Ninety-five percent of the commodities were bearish when the stock market was going down. The stock market has gotten choppy and there have been some nice rallies, but the grains including Minneapolis wheat haven’t popped,” said Alexander.
“They’re going down anyway.”
While corn prices at the Chicago Board of Trade have continued to trend lower, both soybeans and wheat have been flat.
The difference from crude oil prices is dramatic. Since mid-October, Nymex crude oil has dropped to $50 a barrel from about $80, while CBOT soybeans remained at $8.80 a bushel during the same period and CBOT wheat stayed at $5.50 per bu.
Each crop has held within a fairly tight trading range, with wheat trading between $5 and $5.75 and soybeans generally between $8.50 and $9.50.
Minneapolis wheat continued to fall until recently, but it has twice rebounded off price levels that could eventually signal a bottom to the market. But Alexander wouldn’t bet on it.
“That possible double bottom is minor. It did pop off of it, but you have to assume it’s going to take it out and continue to go lower until there’s something that technically shows a reversal.”
Alexander is looking for a big move out of the current price plateau. Things have been too flat recently.
“The longer (these markets go sideways), the bigger the breakout will be, whichever direction it is,” said Alexander.
“The range has gotten narrower and narrower, which might signify that when we break out, it will be big.”
