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Tidbits & Rain Days, Bayer, Mt. Etna, Open Interest Correction, Gaps 02/13/2022

The White House reported Saturday evening there were no diplomatic breakthroughs Saturday after a phone call with Russian President Putin. The State Department has ordered most of its embassy staff out of Kyiv, the Capital of Ukraine. Russian News service reported Saturday morning that Joe Biden said Russia would invade Ukraine on February 16th… that would be Wednesday.


Late Friday, Bayer's global head of active ingredient production, wrote to customers that due to a mechanical failure in the manufacturing plant of a supplier of a key raw material, production will drop sharply. It is expected that the production line will be down about three months. Due to this force majeure event, Bayer has notified its customers that their scheduled deliveries for glyphosate or products containing glyphosate may be affected.


Mt. Etna is Europe's highest and most active volcano. It is located in Eastern Sicily. It has been in a constant state of minor eruptions for decades. Since Thursday night, it has been in a heighten state of eruption. There is no threat to crop production due to ash in the atmosphere yet, but if ash does cause a disruption in the weather, it will be over the wheat and corn areas of Eastern Europe.


Weekly Basis Correction

Late Friday afternoon I wrote:

Corn open interest decreased considerably, yet prices were up 30+ cents. That means traders who were short (sold) were getting out of the corn market (declining open interest), which they had to be buyers of futures contracts to offset their short contracts. Declining open interest with increased price is a weak bull market because there is a limited number of traders who are short. When they have liquidated their short position sufficiently, there will be few buyers.

I wrote that in the "What You Should Have Noticed" section.

Caleb Stahl noticed I goofed because in the corn section, I wrote: "Corn open interest increased by 18,490 contracts to 1,998,012 contracts."

Corn open interest did, indeed, increase, so that means corn is a strong bull market because new money is coming into the corn market and they are buying. We know they are buying because the price was 30+ higher. There is an endless supply of new money available to come into the corn market to buy corn and sustain a long rally.

However, if open interest declined in an up market, that means the buyers were traders who had previously sold the market to go short and now they were bailing out to stop the losses building on their short corn position. That requires them to buy corn futures to offset their short position, pushing the price higher. When the shorts get liquidated down to a comfortable level for them, there will not be very many traders left to buy corn and push it higher. Therefore, it would be a weak bull market that is not likely to last very long.


Increasing open interest with prices moving higher is quite bullish and can last many months.

Decreasing open interest with prices rising is not going to last long and the market will turn lower as soon as the shorts have liquidated. For you as a farmer, that means this is a sell signal... but nothing is 100% in this business. If it was, we all would be rich.


A Measuring or Exhaustion Gap?

Was last Sunday night’s gap on the opening in the beans a measuring gap (predicting much higher prices) or an exhaustion gap (predicting the market rally has run out of gas)?

The Tech Guy said Wednesday he would have that answer after Friday’s settlement.

Here is his technical analysis as of Saturday:

The lack of follow through selling in beans on Friday indicates the buyers are firmly in control. Five days is the rule of thumb for exhaustion gaps (to be revealed) so we have to say the gap is more likely just a brief stop along the way to much higher prices to $17.79 and then to $19.74. However, it doesn't mean the sellers will give up.

Our support* is $15.60, $15.41, and then $15.05 as seen on the 30 minute chart below. These (lower) levels are less likely, but a risk-management plan should always be in place.

Support* for March corn is $6.34 and $6.09. In March Wheat - $7.85, $7.73.

*Prices at which there will be increasing numbers of buy orders as the price moves toward that price, therefore, the price is less likely to move below these levels.

The Tech Guy invites your questions.


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Rain Days Update

Rondonópolis, Mato Grosso, in the heart of Brazil's most productive soybean area, received 0.5 inches of rain yesterday; 0.2 inches a year ago and 0 inches two years ago (one inch = 24.5 mm). Yesterday's high temperature was 86°F. Day time highs the next ten days will range from 81 to 90°F (100°F = 38°C). Yesterday, in the dry areas of South America: Santa Maria high temperature 97°F with 0 inches rain. Cordoba high temperature 81°F with 0.1 inches rain. Salto high temperature 80°F with 0.4 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 0.09 inches, 80 to 95°F. Cordoba 0.63 inches, 76 to 92°F. Salto 0.08 inches, 80 to 94°F. The Western Corn Belt has 1 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 4 more rain days than yesterday.

Explanation of Rain Days

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