Market Monitor

By Marlin Clark

Price correction on improved weather

Ya got ta love a market that crashes on the hope of better weather. USDA released the regular harvest progress report after the close Monday, but during the day the market crashed on news of better weather forecast.

Traders were apparently anticipating that there had been significant harvest progress for the week, and that there was good weather ahead. After the close we found that the progress was still painfully slow. The better weather that will allow periods of harvest has yet to be realized.

Certainly elevators were seeing a good run Monday and Tuesday, but both the bean and corn harvests are historically late. Many NE Ohio producers are still barely over half on the bean harvest. Those who have finished have shown little push to harvest corn because it is still quite wet. The high prices of drying gasses has imposed more discipline that usual the last few years. Locally I am seeing some corn harvest of historically wet ground, but mostly just an "opening up" process. A hard freeze has helped get the last of the green out of the stalks. This is the week I expect corn harvest to get going more generally. However, no one is going to get excited about corn with beans still out.

And, the beans are still out in Ohio. USDA reported Monday that the Ohio harvest was at 75 percent, which is behind last year's 87 percent, but ahead of normal (78 percent). This would indicate that Ohio is much better off than other areas. The US as a whole is at 44 percent, barely more than half the normal pace of 80 percent. That was up only 14 percent for the week, and October is over this week. Leading states of Iowa and Illinois are a major reason for the slow progress. Iowa is at 47 percent, and Illinois is only a third done.

The corn is a similar situation, only maybe worse where farmers have not even started. The nation as a whole is at 20 percent of harvest. Normal is 58 percent. We gained only three percent last week. Ohio is similar to the nation's trend. We have done 17 percent of the corn, up from eight last week, but terribly behind last year's 52 percent and the average of 45. Iowa is at 33 percent, where the average is 86.

Markets had made contra-seasonal highs because of fears generated by a late harvest. A late harvest assumes some loss of yield and quality, and puts immediate pressure on a pipeline that is low is supply. The perk in perceived weather broke prices dramatically Monday. Corn and beans were both down nearly 20 cents on all contracts. The wheat was down slightly more than 20 cents.

It would not have surprised me if we had not seen gains overnight, as traders digested the USDA reports. They would have to be thinking the harvest had been overestimated. This did not happen, as prices are marginally higher on the overnight. The day time open will show us the true mood of the market. The big crop forecasts, if realized soon, will still reflect a market that is overpriced on harvest concerns.

But, the market has proven that any glitches or surprises will have outside consequences in prices this year.

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

Contra-seasonal rally

 

In the normal order of things, prices go down as we approach harvest. Not this year. Prices have rallied sharply in corn, beans, and wheat, and market watchers like me are stumbling around looking for a reason.

Last week we talked about surprises in the USDA Crop Production Report. Uncle Sugar says the corn and bean crops are even bigger than expected, but prices refused to go down. I gave as excuses for the market action the delayed harvest and frost worries. The frost worries were a little too late to be a concern.

So, what do we have for the last week? A little retracement, then back near the highs.

Rains continued until the end of the week, so harvest progress was slow. Thursday night had snow flurries in Cherry Valley, and two inches of snow in parts of Western PA. Sunday was beautiful, an example of why we like to live in Northeast Ohio. Monday through Wednesday are supposed to be similar, only warmer, so look for the bean harvest to go a long way toward catching up. That catch-up will be at the expense of the corn harvest, however.

Monday USDA released the current estimates of harvest progress, and it is ugly. The US has beans at 30 percent, up from 23 last week. That is way behind last year's 64 percent, and the normal 72 percent. Ohio is similar to the nation as a whole. We had 34 percent harvested, up from 28 percent, but less than half of last year's 77 percent. Last year was ahead of the normal 68 percent. Some Western Corn Belt states are even worse. Iowa posted 37 percent harvested against a normal 85 percent.

The US has corn 17 percent cut, up only four percent from last week. That lags last year's 28 percent and the average of 46 percent for the last five year. We are hugely behind. They show Ohio at only eight percent, up just two percent from the week before. Frankly, I wonder who could have done that two percent. Last year this time we were at 35 percent, a little above the average of 31. Some of the biggest-producing states are the worst. Illinois has an average of 68 percent harvested at this time, but came in at only 11. That was up five percent for the week.

The market will continue to focus on harvest progress, and maybe that will drive prices, but expect volatility. Recent moves have caused producers to put in targets which may be unrealistic once we get the huge crops in.

November soybeans made a low in early October at 8.85-1/2. Harvest delays pushed that to $10.13-1/4 in a little over a week. This week, on the 15^th, we retraced to 10.02-1/2, but we traded a high of 10.08-3/4 overnight Tuesday morning.

The December corn was near $3.00 in early September, but had hit 3.88-3/4 by last Wednesday, the 14^th. of October. That did not hold, as we retraced to 3.68-1/2 the next day, but the overnight this morning put in a new recent high of 3.89-1/2. It would appear that the delayed bean harvest market is becoming a delayed corn harvest market.

While this was going on, December wheat futures were putting in the bottom in Chicago. Wheat has been in steady decline since the first of June, when the December put in a 7.25-1/4 high. October 5^th we bottomed at 4.39-1/4, and we have rallied as high as 5.29 on the 14^th. Currently December Chicago wheat is at 5.18.

 

 

 

 

 

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

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.