Inside The Market

Winter's Last Icy Breath

Image by Gregg Hillyer

Keep in mind this piece was written before knowing how much of January’s weather would play out. But, if late-December and early-January icebox conditions were any indication, the famed “polar vortices” of years past were nothing more than a bit chilly. Good heavens it was cold across North America as we worked our way through the first half of winter. Penguins reportedly left Antarctica for San Antonio to cool off.

Or, so I heard.

But, none of that matters now, for the end is in sight. According to the meteorological calendar, the end of February marks the end of winter. And, to this year’s version, I, along with many others I’m sure, bid a fond “adieu.” But, before we get to March and spring, and winter’s long dreams of planting something, anything, in the ground, we have to get through February. Isn’t it nice that it’s also the shortest month of the year?

CORN OR SOYBEANS? As usual, much of the planted acreage pondering and pontificating has centered on corn and soybeans. Will 2018 be the year soybean-planted acres finally surpass corn here in the United States? Or, will corn growers, somehow, follow their hearts to plant another increase in acres? In other words, and pardon the upcoming pun to all you Shakespearian aficionados, “To ‘bean’ or not to ‘bean’, that is the question.”

Earlier this winter--the last of December and first of January--my weekly On the Market columns on DTN discussed the major-major-major-major (M4, extremely long-term) trends on yearly charts for both the DTN National Corn Index (NCI) and DTN National Soybean Index (NSI). Based on the theory of Negative Time (another column topic from 2017, discussing the possibility markets move now because of how they will move in the future), the U.S. could actually see more corn acres planted in 2018 than soybeans, while demand for U.S. soybeans continues to grow.

How on earth can I tell that from a couple of extremely long-term charts? I’m glad you asked.

CHECK THE CHARTS. First, soybeans posted a bullish key reversal during 2016 (traded outside 2015’s range, including a new low for its downtrend, before closing higher) followed by a “quiet” inside range during 2017. This technical pattern would suggest the national cash price for soybeans should see a move into its M4 uptrend at some point. On the other hand, the NCI still looks to be in the final stages of its M4 downtrend, one that is projected to produce a new low (below the 2016 low of $2.73) in the fall of 2018 before rallying.

How will another monster Brazilian soybean crop and variable summer weather in Argentina affect the decisions of North American producers? Or will it, given what we’ve seen during the past North American winters? How about the new-crop futures ratio (November soybeans divided by December corn) that has indicated since last fall that soybeans are begging for more acres to be planted?

All of this has been taken into account as we sit here in early February, watching the thermometer for signs of life, reading the latest news regarding Brazil’s crop, waiting for winter to take its last icy breath.

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