Market Monitor

By Marlin Clark

Swimming into new crop

The best thing I can say about the three inches of rain I have dumped out of the rain gauge over the last few days is that it did not come in October. Much of the corn has been chopped, and the beans are not ready. We don't need the rain, but it is not holding harvest up much. I would hate to be trying to plant wheat, however.

Still, this is the time of year when we worry if we are going to have 60's and sunshine or if rainy fall runs into snowy winter. I remember picking corn on an open tractor in 15-degree weather, and I shiver from the thought. I remember the fifty acres of beans we ran on frozen ground in February, and trading grain seems like an easy way to make a living.

This is the time of year when I starve out my truckers as we hunt for the last give-up bushels of corn. Farmers are tempted to leave them in the bin now that they did not sell them a dollar ago and they are not sure of the size of the new crop.

Trader talk this time of year is all about USDA projections and why the traders know better. The market trades the USDA numbers like they come from the Book of Revelation, but they talk out of the side of their mouths about why USDA is wrong.

Take your pick of suspect guesses by the government gurus. The corn crop is not nearly 13 billion bushels. The summer was too cool for the corn to do that well. The usage next year is not going to be over 13 billion bushels to bail us out of the big crop. Uncle Sugar is expecting way too many corn bushels to go into ethanol when that industry is still running losses.

Soybeans are subject to some of the same scrutiny. The support in bean prices while the corn was dropping was due to the shortage of old crop beans, the traders argue. We were told in January that we would run out, and now in September we have not, but it has been close. The high prices have rationed usage. The bean processors that would not contract meal because they worried about having beans to crush are now smelling new crop. If it would stop raining, they would have it.

So, if it was the old crop shortage that supported prices, the argument is that the new crop will collapse as soon as we start filling up bins with the new crop beans. In fact, there is a near inversion in the soybean market that would confirm that thinking. The highest-priced month is January, just a nickel over November. There is a penny carry to March instead of a normal ten or 15 cents. July futures are essentially the same as November.

It is encouraging that corn has not gone to zero, though it made a run at it. We are actually forty cents off the December futures low of 3.02 on September 8^th. There has been a lot of volatility to confuse things. One day we were up four cents and the next down for cents. The optimist says we are going higher, the pessimist says we are going lower, and the realist says the market did nothing for those two days. I am reminded that Pappy always told me that there are three kinds of people in this world: pessimists, optimists, and realists. He says no pessimists should farm and very few realists do.

The realist in me says there is nothing new under the sun. Eventually, and soon, the crops will be off and we will be smarter, but not necessarily wiser. The corn crop will be smaller than expected, or larger, or the same. The big crop keeps getting bigger statistically by the USDA method, but the corn is not corn until it is binned.

Soon the talk will be about the high price of propane to dry all the corn, and farmers will be complaining about how cheap my price is for the bushels they have left over that they didn't think they were going to have a couple of months ago.

Then, the combines will get parked, and the hard work begins. Growing it is always easier than selling it.

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

Market Monitor

By Marlin Clark

The Squirrel and the 'Possum

A story of American Agriculture

 

I have had bird feeders close to the house for 35 years. The bear tore them down a couple of times a few years ago, and we had to stop feeding for a month. Other than that we have always fed a herd of a few hundred "livestock" as I call them. Most of the customers are very regular. The chickadees are nearly tame, and stay in the lowest branches of the tree when I am filling the feeder. One frozen goldfinch let me pick it up on my finger last winter.

Fairly regularly when I take the "boys" out, I have to tap the glass on the door to scare away a squirrel. If not, the "boys," a black Lab and a white Westy, have to chase it instead of doing what I took them out to do. Some people try to keep squirrels away, not wanting to seed sunflowers wasted, but I figure he is just getting fatter, and he is fun to watch, and he is likely to just be a bigger meal for the Lab some day.

At night I have to watch for the 'possum at the base of the feeder. If I don't warn him we are coming, he quivers a little, then passes out. I have always heard that they "play possum." Not so. Some chemical, the opposite of adrenaline, hits his blood stream when he sees Chubbs, and he never moves another inch.

I think of these animals as I watch the grain markets these days. Corn seems to be headed to zero, if you are a farmer who remembers $7.00 corn. The bottom has actually been 3.02 on the December contract, but that is pretty ugly if the seed and fertilizer cost you so much that you spent $4.00 a bushel to grow it.

The market used a frost scare and a bullish USDA Supply and Demand Report to bounce to 3.47-3/4 a week ago, but that didn't last long. A frost scare requires frost eventually. We closed back at 3.16 yesterday, but have gained 3-1/2 overnight. November soybeans had a low of 8.92 on the 14^th, but was nearly 86 cents higher at one point the next day. The high did not hold, and we are now at 9.21.

Volatility in the markets gives opportunities some times, but the squirrel farmer and the 'possum farmer miss them.

The squirrel goes energetically to the market feeder with one eye out for something bad, but as he gets started nibbling, the ADD kicks in and forgets to pay attention to what is going on around him. Suddenly that lumbering oaf of a hundred-pound Lab who can't run as fast as the squirrel if he is paying attention, has chewed enough of him to get him in his mouth with only the feet and tail sticking out.

The marketing 'possum goes to the feeder tentatively, and at the first sign of trouble freezes in place. Unable to act, he loses his opportunity.

The little birds, meanwhile, nibble a little every day and thrive. No matter if the feeder is piled high or just has a few seeds in the corner, they do some regular marketing and don't worry . The market Lab can't bite them if they just do their job and don't hop onto the ground where they don't belong.

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

Market Monitor

By Marlin Clark

Low prices, more demand

Two old axioms of the grain trade were being talked about this last week. One is that a big crop keeps getting bigger. The other is that the cure for low prices is low prices.

The market continues to talk about a huge crop, and USDA keeps confirming that, but demand is growing. Several reports from Uncle Sugar kept the chatter going in the pits in Chicago Friday and Monday. Principle interest was in the USDA Crop Production Report and the US and World Supply and Demand Reports.

One long trend of USDA reporting is that in big crop years, USDA reports bigger and bigger crops in successive reports. That would be true for this year, as Friday they reported a two percent increase in the corn crop from what they projected a month ago, to an even 13 billion bushels. If realized, that would be seven percent more corn than we produced last year. They expect an average yield of nearly 162 bpa.

At the same time USDA pointed us toward a record soybeans crop of 3.25 billion bushels, up one percent from last month and ten percent above the 2008 crop year. The average yield would be 42.3 bpa, the third-highest ever. Ohio is projected to tie the state record average yield. This is understandable driving around my area where the crop looks to be by far the best ever. It is not understandable if some anecdotal tales of poor podding are general and not just reports from isolated farms.

Key to the USDA reports if we are trying to make sales decisions is the brightest spot in the reports: USDA says we will have record demand for corn! The pundits from Uncle Sugar expect us to use 13.025 billion bushels of corn this crop year. In other words, we will more than use of the near-record crop. As a result, the carryout that was feared would near the two billion-bushel mark will actually come out 60 million bushels lower than the projection last year at this time. We are now looking at 1.635 billion bushels of carryout, the grain left in storage at the end of the crop year.

The increase in usage is a reflection of the idea that the cure for low prices is low prices. At the lowered prices we are now seeing, demand is increasing.

Key to that demand is usage for ethanol. For all the industry has been suffering and seeing major shake-out of some companies, ethanol usage of corn is projected at 4.2 billion bushels, up from 3.675 last year.

It remains to be seen if these reports are correct. It remains to be seen if the result is more than the firming of corn prices we have seen the last few days, or the start of a step up in prices. Overnight corn is up a nickel, and is at 3.23, 21 cents better than the contract low we put in just a week ago.

Friday USDA projected that demand this year would set a new record.

 

 

 

 

 

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

Market Monitor

By Marlin Clark

While living in India as a student, I was tormented for awhile with a certain dream. I returned home to Cherry Valley after a year of wandering the world and the house I grew up in was gone. I could not find my parents.

The dreams stopped the day I realized the house was gone! I was remembering the house where it used to be. Dad moved it 900 feet east when Route 11 came through our farm. My dream was a mixture of reality and fantasy. My subconscious mind had not adjusted to the reality of the move.

I was experiencing what, in the modern age, we like to call a paradigm shift. The rules and circumstances had changed.

The grain business is in the middle of one of those shifts, and it is not pretty. The shift was to unlimited demand by the booming ethanol industry last year. The boom exploded prices until corn was worth over $7.00. The industry analysts talked like this was a shift that would forever change the landscape of agriculture. Corn acres increased sharply, resulting in exponential growth in input costs, limiting the profit growth for the producer.

That was then and this is now. Now we have ethanol plants bankrupted by those high corn prices, and sitting empty. Now we have the increased acres and good projected yields that have us with nearly a two billion-bushel carryover in corn coming. Now we have the high input costs to plant this crop that we cannot recover from the reduced prices as the new shift has us back to less demand.

December corn futures mad another new low on the Monday overnight, at 3.02.As recently as August 3^rd we were at 3.76. November soybeans touched 9.10 overnight, although they also traded at over 9.35. There is a lot of volatility, even in one day.

Harvest is close, and we should expect lower prices unless we are surprised by last-minute problems or yields. The real surprise though, would be conditions that would cause us to boom again. We are stuck with the shift in mood, the shift in conditions.

The house I grew up in is still there, in its new location. Mother rode along, playing the piano while it was moved. She is gone now, and Dad before her. The house went outside the family. I can't go home again. And, we can't go back to the markets of 2008.

 

 

 

 

 

 

 

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

Market Monitor

By Marlin Clark

Harvest creeps closer

Time flies. The earth spins, the days come and go, and inexorably we creep toward harvest.

Many questions remain as we approach the end of the crop year. Not the least of these is, what size crop do we have? The government says it is huge, and recent revised USDA reports have traders back on their heels, trying to support prices.

The August 12^th USDA Crop Production Report put the corn at 12.761 bushels of estimated production this year. This is up a half-million bushels since the July report, and two thirds of a million higher than last year. It is also a coupla hundred thousand more bushels than the traders expected.

USDA now puts the soybeans at 3.199 billion bushels, a little less than the traders thought, and down 51 million from the July report.

But, try to find someone locally who believes these numbers! This has been the summer without summer. By my count, in Ashtabula County we had one day in August of 90 degrees, and that was for about 20 minutes before it slipped back into the eighties. The coffee break on the balcony in the morning requires a sweater. It just seems like we are ten degrees too cool on most days.

It was 43 degrees when I walked the dogs this morning. That seems a little cool for the first day of September, and it gets me thinking what a lot of farmers are thinking: should we worry about an early frost?

I am not walking the fields, so I am not sure just how far along the corn is, but it seems like we are late. A morning this cool makes me think that we are not that far from too cool, and it is only the start of September.

Now, farmers like to worry, and nothing will likely happen. Still, is seems like maybe the market should be building a little fear into prices. So far that is not happening. Over night we were down again, and prices are terrible compared to the cost of inputs. Of course, historically these are still good prices, and the market does not care what your cost of production is.

December corn futures dropped to 3.11-1/2 on the 17^th, then gained 26 cents by the 25^th. 17 cents were gone again in the next week. We closed the month of August at 3.20-1/4, about $2.70 new crop cast.

Beans had a high in the middle of the month at 10.66 Novembe3r futures, but were only 9.40-1/2 by the 19^th. Monday beans had a 51-1/2-cent range, and closed at 9.67-1/4. That is up off the low, but not what we would like.

The Chicago wheat futures have exhibited a steady downtrend, losing nearly $2.50 since June. We closed December futures Monday at 4.98-34, 18 cents better than the low during the day.

 

 

 

 

 

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