The risks this spring were significant both lower and higher to the grain markets. Price had one objective and that was to make new lows in both corn and soybeans. Corn attempted to make new lows, but buyers were willing to make yet another higher low which has led to the failure by sellers. Sellers have now shown that they will attempt to contain price around and slightly above the $4.40 area as they have in prior years. The issue for sellers is that, so far, they aren’t able to accomplish much for their efforts. Most rallies to structural areas have been met with sellers that crush price lower. This year, it appears all they can do is contain price. The longer price congests above $4.40, the stronger price appears to be as it continues to be rangebound. It has been my opinion that the corn market has yet another drive higher possible this year. The swing structure and the frequency of price suggest a high probability that corn can potentially achieve levels above $5 per bushel.
The soybean market structure is different from that of the corn market as it has confirmed major and minor pivots. While these structural areas will need to be dealt with by price, the context of the soybean market lends itself to a larger swing correction. The most recent controlling swing fork is upsloping and shows a high probability of price reaching the median line currently at $11.50 per bushel. The controlling fork is showing the likely path of price going forward after what appears to be a significant pivot made this spring. The most likely area for soybeans to trade to is above $12 later this year. Currently, the formation appears to need time and a slightly deeper correction before price is likely to begin a potential rally higher.
I’m often asked what type of fundamental catalyst would cause a rally to these levels. I do not know what event may be assigned to a potential rally. It could be that the Corn Belt gets an early freeze, a trade deal with China is struck or any other unforeseen event. The event does not matter to price. What we need to be asking is where does price have the energy to go, and does the market structure support such a move? It is my opinion that price is showing strength, the market structure is conducive to a larger correction and price has large amounts of energy at its disposal.