Market Monitor

Head scratching in the Corn Belt

By Marlin Clark

It wasn't that long ago that I was telling callers that we would go back to test the 3.02 December futures low on corn. I was also leaning to the idea that soybean prices had been supported by old crop shortage and good demand, but prices would decline as soon as we could sniff the new crop.

To say that these things did not happen is an understatement. December futures hit 3.83-1/2 both Monday and on the overnight Tuesday AM. This is the highest price since June 30^th. November soybean futures have rallied $1.33 since the fifth of October, to 10.12-1/4 overnight Tuesday morning. This is close to the August 30^th high.

To say I was wrong is an understatement. My head-scratching is causing a rash. Soon this will be known in my office as the bloody scab market.

The amazing thing is that this rally comes as the government is telling us the crops keep getting bigger. Friday USDA came out with a production of 13.018 billion bushels of corn, up from the 13 even of last month. The soybeans were increased by five million bushels, to 3.250 billion. Friday's reaction, after the report, was for beans to be up 28 cents. Corn was down a coupla cents on a confusing, what-do-I-do-on-a-Friday 15-cent range.

Traders made up their mind on corn Monday, pushing December futures 19 cents higher. The question remains, why?

Two factors are pushing prices. First, for all the talk about big crops, the crops are late and winter is coming. In the heart of the Corn Belt, little corn is off and the beans are being cut only on the second day after the daily rains. That means, mostly not at all. Bean combines were running in my neighborhood Monday, but most areas were still rained out from Friday.

The second factor is a disagreement about reality. Try to find a farmer or an elevator manager who agrees with the USDA numbers! We had the summer without sunshine, and corn is still green. The corn that is off is resulting in grumbling about low TW, with a lot of 52-lb. stuff being talked about. Hopefully, we end up with 54 for a crop, but if you are in an area that 58 or 60-lb corn is normal, you can be looking at 10percnt off that near-record crop right there. What if a TW problem represents a billion bushels less corn?

It is not just corn TW. Farmers are talking about widespread white mold in soybeans and ear rot in corn. So, we might have quality problems to add to reduced yields.

Now, USDA is easy to beat up. Farmers generally believe that the government plays games to manipulate prices. I don't believe that is true, but the mythology of this is large. An example of this not being true is that fact that "large crops keep getting bigger." In fact, this is USDA not wanting to put in big numbers one month, then taking them out the next. They stay conservative with the large crop projections until they really are convinced, and they add to the crop estimate each month.

So, which is it? Do you go with USDA or with your gut? Is your gut your excuse to do nothing? With these gains, it should be time to reward the market, but the impulse to wait until the bins are full is strong.

 

 

 

 

 

Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.