February 16, 2024

 CORN, WHEAT AND SOYBEANS…

ALL CLOSED, AGAIN, INTO NEW LOWS THIS WEEK

And it is NOT too late to GET SHORT

 
But to start with a little history here first…

The FACT is: Corn, Wheat and Soybeans made their highs in May-June of 2022 and have been in bear markets ever since. (see charts following)…Even so, here we are still making new lows in all three and I have yet to hear a single analyst refer to them as being “in a bear market.” I’m sure there must be a few out there, but I still haven’t seen them…And as I keep saying, all I ever hear is talk referring to, “When China buys,” the “weather in South America” and “support is at ___,” etc. and virtually NOTHING about prices going truly lower in any major way. For sure, any time we make new lows, you might get some degree of , “could get down to $___,” but the reality is that for the last $6.00 of declines in Wheat, $4.00 in Corn, and $6.00 in Soybeans, ALL of the rhetoric from ag analysts has very definitely been 99% slanted toward the Bullish side…and in doing so, have therefore tremendously influenced farmers to hold off in selling their crops as they wait for the “next bull market rally,” to sell into, the end result being that what you see on the next three charts has resulted in those farmers having forfeited massive dollars as Wheat, Corn and Soybeans continued to slide lower and lower…And beyond those dollars already lost, I’ll add that it is NOT insignificant that farmers are STILL holding enormous stocks of both Corn and Soybean that, simply stated,  REPRESENT MASSIVE SELLING, THAT FOR THE NEXT FEW MONTHS, STILL WILL BE HITTING THE MARKET.

And for the record, here is the very strong statement I made in my May 16, 2022 newsletter:

My opinion is that is just about impossible for these four markets to remain at their current levels…and that all of them WILL get clocked for a minimum of 30% of their top tick values…and that the odds are now EXTREMELY high that ALL FOUR OF THESE MARKETS HAVE RECENTLY MADE THEIR HIGHS…for YEARS to come.

And here is the “proof,” that in spite of ag analysts basically remaining forever bullish, Wheat, Corn and Soybeans have been in bear markets ever since…

And now? Even though they're still talking about "Where's the bottom?",  I say Corn is clearly still in a bear market...with one big phase left...wherein a final NASTY collapse takes place as farmers become terrified of losing even more money…and AS ONE MASSIVE CROWD…BASICALLY PANIC SELL ALL THOSE NEAR RECORD CORN STOCKS THAT THEY’VE HAD STORED…WHILE, WAITING FOR, AS PROMISED BY ANALYSTS,  “THE NEXT BIG RALLY."

And as for Soybeans?...I seriously THINK THE BOTTOM IS ABOUT TO ABSOLUTELY FALL OUT HERE...and THINK WE COULD BE IN THE LOW $9.00 AREA WITHIN THE NEXT FEW MONTHS.

Not long after that May, 2022 newsletter, I also wrote that farmers should hedge (sell) their production in these crops for as far out in the future as the futures markets allowed them to do so, with market histories suggesting that it would minimally take several years before we could even begin to think about  the next bottom (which, btw, is NOT here yet in Corn, Wheat and Soybeans).

 Getting back to the present…

Right now, with Corn, Wheat and Soybeans ALL pushing lower and lower, I am dead certain that every farmer in the United States is getting more and more worried as they watch bigger and bigger dollars disappear in ALL THREE MARKETS AT THE SAME TIME, and with 43 years of observing human behavior when it comes to winning and losing in commodities, I feel extremely confident in saying: PANIC SELLING IS COMING. In this business, whether it’s in futures or in owning the actual commodity, at some point, week after week, or month after month, of LOSING MONEY in a market DOES lead to outright capitulation, of totally giving up, of finally being forced into saying, “ I can’t take it anymore. Just SELL! Sell it all.” And that IS what I think is dead ahead for Corn and Soybeans…where yeah, EVERYBODY does give up…and yeah…Both markets DO go straight, straight down…where you get something like 8 out of every 10 trading days resulting in a new low close.

The big, big picture…some very interesting 100 year charts…

When it comes to crops, it is almost inevitable that times of great shortages and extremely high prices are followed by exactly the opposite, that is, massive over supply and extremely low prices. And you can be assured that EVERY time one of these markets is at its highs, all of the wildly bullish press leads farmers to believe there is NO WAY prices will ever go all the way back down to the last big low…But…as can be seen on the charts below, that’s what these three markets have done over and over and over for the past century…And I seriously doubt that is going to change…

You can note that all three markets have had 3 fairly well defined 15-20 year ranges since WWII...with each of those ranges having had numerous bull and bear markets. And at each top, I don't care how bullish the fundamentals were, or how big the bullish phase had been…one more time… in virtually EVERY case THEY WENT ALL THE WAY BACK DOWN TO THEIR PREVIOUS LOWS.

Here are my recommendations at current levels…

Some of you old timers will know what I mean by this…because you’ve certainly seen it yourself: Do you want to know when you can talk about a bottom in these markets?

It will be when the news is full of stories about Corn, Wheat and/or Soybeans being  piled up under tarps on Midwestern high school football fields, accompanied by headlines shouting, “So much of it there’s no place to store it all!” THAT’S when you can talk about a bottom…And believe me, we are still a million miles away from there.

Corn and Beans have continued to just drift lower…but I firmly believe…literally, literally, literally…ANY DAY OR WEEK NOW THEY ARE GOING TO JUST CRATER AS FARMERS DO START THROWING IN THE TOWEL…Let’s get real…The fact is, thanks to the ag analytical community, farmers have been big time WRONG to hold on to their crops…and what is NOT going to happen is that the markets are suddenly going to turn back up and save them. That ain’t how this stuff works…EVER…And finally, in bear markets, it’s typically that last nasty ass 30% of the move that is the biggest and fastest…So…one more time…It’s NOT too late to get on. In fact, this might be the optimal time to be getting short.

Call me if you want to do something with either of these markets.

The markets, btw, are closed Monday but reopen at 8:00 EST that night. Feel free to call if you want...I think it is entirely possible we could be sharply lower by Tuesday morning's reopen.

Thanks for reading this far.

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Soybeans, Cotton