The deathwatch of the markets has been cancelled today with a cross-market rally taking everything up.
Even that sad sack commodity of oats.
For people who still hold equities, it’s been an appalling last few days to watch the Dow Jones Industrial Average fall well below 7,000. That’s below the November 20 low. It’s been better in ag commodities. It hasn’t been a happy few days of higher prices, rivers of chocolate and moutains of candy to climb, but most of the lows of this recent period have been above the early December lows of the ag commodity markets. What’s been happening looks like a continuation of the correction that’s been happening after that sudden post-early December rally.
Read Also
Producers face the reality of shifting grain price expectations
Significant price shifts have occurred in various grains as compared to what was expected at the beginning of the calendar year. Crop insurance prices can be used as a base for the changes.
Canola which bottomed at around $370 per tonne (ICE futures price), then rose to about $450, has declined to a little over $400. It hasn’t set new lows and that’s a good thing. CBOT corn, upon which our Canadian feedgrains are based, has been gently moving down from a $4.30 per bushel peak in early January to around $3.50 this week. That follows the post harvest low of less than $3.20. Soybeans, the strongest of the big commodities, started its late’08 rally at below $8.00, crested at $10.40 and has fallen back to around $8.70.Â
What’s interesting about the last few days is that ag commodities didn’t get sucked right down the toilet with the equity markets. Ags seem to have kept some of their independence from the equity markets, something that was sorely lacking in the post-July slump. By itself that’s good, because there are lots of reasons right now why ag commodities could enjoy a rally.Â
However, it would be nice if ags got connected again to the equity markets if they reverse course and enjoy a sudden and spectacular bear market rally, which many analysts expect. Even the most bearish of the bears that I follow, Robert Prechter of Elliott Wave International, thinks there’s great potential for a big rally soon and he’s been warning his subscribers to get out of their short positions, positions he earlier recommended. (He also expects the financial institutions that are holding speculators’ accounts and money to go bust, so it isn’t just the likelihood of a market turnaround that he’s concerned about for short sellers.)
The present structure of the ag commodity markets doesn’t yet suggest new lows are coming soon and that the December rally was a false spring. But it’s getting to be about time for the market to show its hand, for it to rally, or fall back into the pot.
