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Published January 11, 2011, 11:58 AM

That was then and this is now

At the Farm Journal marketing rally held in Chicago a year ago, all fifteen panelists were bearish for soy and grain prices for 2010.

At the Farm Journal marketing rally held in Chicago a year ago, all fifteen panelists were bearish for soy and grain prices for 2010. True to form, as we entered the first few trading days of January, corn futures topped and the market fell into January’s final production supply and demand report.

The report offered bearish surprises and the bottom fell out. Bearish trends existed for grains and soy into June and July before bottoming on a bullish plantings report and quarterly stocks report.

December corn, having hit a major wave count to the downside, had priced most of the negative news in. So, with a surprising report and news of drought in Russia, the Ukraine and Kazakhastan majorly affecting the wheat crop, prices exploded to the upside. A whole new market was born. Like 2008, only in reverse, prices trended lower into June and July then trended higher for the whole last half of the year. Time changes everything.

This past December, the panelists at the marketing rally were bulls. Can we expect a bull market into summer? Probably not. 2011 is going to be one of many variables and directions of price movement, and will not be loyal to one direction for very long. The all-time high for a lead month of corn is $7.65. A December contract is $7.99 ¼ and, at time of writing, March corn has traded to $6.26. That is a $1.39 away, and on the close of Dec. 30, March corn has rallied a $1.04 from the November low.

Prices have been moving fast. Argentina is enduring hot, dry weather in corn producing provinces at a time when corn is in pollination. Production estimates already are starting to decline for the world’s No. 2 exporter. I expect a higher high in January, probably off of a reduction in the yield in the final production report, and then we will have to see, does USDA say it has found more acres to buffer the news? We can’t forget that, in all likelihood, new crop corn was commingled with old. Will USDA admit it? Probably not yet.

Corn prices are at two-year highs and funds may elect to do some rebalancing of portfolios. Crude oil prices have reached over $92 a barrel. That should be supportive towards corn prices.

Cattle prices are stout and feeder prices are through the stratosphere. I would not expect much of a pullback in prices until after the government’s report. The market’s job is to ration corn, especially if the No. 2 exporter finds itself in trouble with production.

However, there appears to be a fair amount of feed wheat around, and China is ending 2010 with rhetoric that it is going to file complaints with the World Trade Organization against dumping of distiller’s dried grains by the US from July 2009 to June.

At that time the price of corn was below domestic prices in China. I find it difficult to know why China would complain, after all, corn prices in China have appreciated in the past year. So, did distiller’s dried grains hurt producers prices?

Then there is the dollar. In my opinion, U.S. currency probably has seen a low, which is not a popular belief.

If I am correct, the dollar may play a part in 2011 grain price rallies. The big unknown is what Midwest weather conditions.

I have noticed that the sun has gone back to minimum activity. But there are more factors than that. We shall see. The bottom line is, 2011 is going to be exciting.