Market Monitor

By Marlin Clark

Harvest struggles to its conclusion amid volatility

When prices go up and down, sometimes without reason, we call it "volatile." When we can explain it, we describe cycles and retracements and corrections. We have a basket full of adjectives to describe the chicken-entrail sketching on our charts.

This market we just describe as erratic. That means it has evaded the grasp of our vocabulary, and we are just reporting what happened. No one in his right mind is predicting what is next, but is rather just speculating on what can happen.

Part of what can happen will be speculated upon or even predicted by the brave and foolish, this afternoon after the latest USDA Crop Progress Report. The corn crop, which should have been binned three weeks ago, is still partly in the field. This afternoon Uncle Sugar will tell us how big that part is.

The delayed harvest has helped prices on some days. Those are the days when traders feel the crop will never be finished and we are losing some of the supply we thought we had figured into prices. Some days prices go down. Those are the days when traders think that it doesn't matter how long harvest takes, the corn is still there and it is a big crop.

Producers have been more focused on space than on price. Some have looked ahead to sell deferred corn on days the market has been better, and that makes sense. I quoted 4.20 ti a man this morning for corn I would pick up at the farm in January of 2011.

Mostly though, farmers are just selling enough to get the crop in the bin. Then, they will sit on it, dreaming of $7. Or $4.50, or $5 or some other magic number which, when we get there, they will think is too cheap. The hardest part of farming is not getting this harvest finished. It is doing the marketing. This is probably so because you are on your own. It is not your fault if it rains. It is your fault, and least it reels that way, if there is a high price for corn and you pass on it until it gets cheaper. It feels like everyone is in the same boat with the weather, but each marketing decision floats or sinks on its own.

The good news about corn for the harvest season is that it has gained over $1 a bushel in recent times. On September 8^th, with a crop report for the second biggest harvest in history staring us in the face, we made a recent low on December futures of 3.02. Delayed harvest, added to a small cut in USDA expectations in the November USDA Crop Production numbers helped us get to 4.13-1/2 December futures on October 23^rd. Now, a month later, we are trading just under $4.00, after a dip to 3.59-1/2 on November 11^th.

So, a dollar up, 75 cents down, 50 cents up and ten cents down (rounded off) pretty much describes a market that is erratic.

Meanwhile, the last ten trading sessions have shown steady, strong gains in the soybean markets. Yes, we had an ugly low October 5^th at 8.85-1/2 on the January futures, but after one short cycle we have been higher. We had a $10.29-1/4 high on October 23^rd, then dipped to 9.74-3/4 four days later. Since then we have been up, to the overnight high this Monday morning of 10.66-3/4. This is nearly identical to the 10.68 high made in the middle of August. You have to go back to June 11 and 12 to find a higher price. Then, we wondered if the crop would ever get planted, and we put in the 11.05 contract high.

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 drags into Thanksgiving

USDA released the Sunday night Crop Progress Report Monday after the close, and it was not pretty. Harvest still drags on, and rain coming into the Midwest this week will not help. Thanksgiving will come and go with corn and even soybeans still in the fields.

One of the biggest traditions of my youth was that we gathered for a noon Thanksgiving dinner, and then piled on the Carharts for one more push with the corn picker. This was in the dark ages, when we thought planting corn by the end of May was okay, and picking 250 acres of corn with just a two-row corn picker was high tech! It was, if you remembered opening fields by hand and picking corn into flat wagons, then shoveling them over your head into wooden slat cribs. I remember the first elevator, and the first time I saw silage wagons with a winch on the rear that pulled most of the corn off the wagon. Pardon me, I have slid directly into geezer mode.

The delayed harvest is the biggest reason for some volatility in the markets that set new benchmarks for the period on Monday's trading at the Chicago Board of Trade. December corn futures traded over $4.00 and January soybean futures bested $10.00. These are huge psychological numbers, and represent a significant bullish mood in the markets. The move is being described as "short covering." This means traders had sold the market short, anticipating harvest catch-up and record crops of beans and near-record crops of corn.

In fact, the market slogs on, still worried about the harvest and harvest losses of yield and quality. The end of day reports would be thought to encourage the market overnight, but the big news is that it went down, with corn and beans both off nearly a nickel. The December corn is now back below $4, but the soybeans hover just above $10.

The overnight correction would reflect that the harvest progress numbers were not really as bad as what some traders feared, and that they were already "in the market."

Looking at the reports we see that the nation as a whole is up to 54 percent planted.That is up from 37 percent, but is sadly behind the 77 percent of last year and the five-year average of 89. Ohio is slightly ahead of that, but only at 58 percent. I would not have been surprised if the number was 70, with the good weather we had locally, but there are a lot of acres to go. Our harvest is being slowed by wet corn, also. Farmers are reporting to me that the corn is wet enough that they can only shell for half a day before they run out of dryer capacity.

Iowa has caught up to our pace and reports have them 59 percent done, a gain of 25 percent for the week. Illinois is similar to us, at 52 percent, but gained 19 percent.

The nation's bean harvest still lags at 89 percent, with a 96 percent average.

So, this might be Turnaround Tuesday for the bulls, with the overnight pointing to lower markets. Adding to the negative news is the CBoT deciding to put a vomotoxin specification in the corn contracts. There is so much high-vomo corn around from this delayed harvest and cool summer that the Board is worried it gets delivered to Chicago. Three years ago the Board did the same thing to wheat and it contributed to a lack of convergence between cash and futures prices. Expect this to contribute to lower basis in the country.

 

 

 

 

 

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

In the dark, with guesses

The market is poised for action on Monday as this is written. USDA reports that can move the market are anticipated, but we are all in the dark at this moment.

Monday, after the close and after this is written, USDA will release the weekly report on harvest progress. Then, before the market opens again, we will see the USDA November Crop Production Report. These reports can be negative to prices, or positive, or even work against each other. Interesting times, and I get to make some guesses here because we have a day and a half to go to some answers.

Prices trended sharply lower last week as traders seemed to believe there was good harvest progress being made for a change. It remains to be seen if that is true, but we were sure coming from a long way back. Last week USDA told us we were all the way up to 25 percent harvested on corn! We should be rounding third and on the way home!

Even while the market was expecting big gains, the weather was spotty. Around NE Ohio, the combines were rumbling, and so were the complaints about how wet the corn was. The complaints about the yields were not so universal. There have been pleasant surprises. Those with high-test weight varieties have also had some good yields. One large farm operation in Trumbull County is reporting 200 bpa corn. That is not as good as the record yields of last year, but it is notable in a year of cool temperatures and worries about that effect on the crop.

We still have beans standing in some areas. Where the beans were being chased, the corn is not catching up. So, the USDA numbers will be interesting, then they will be dissected, then they will be disagreed with.

Remember, the perspective of the last big reports was for a record soybean crop and corn crop second in history. Along with the 13 billion-bushel corn crop was a usage slightly higher than that. The usage was supposed to blunt the size of the crop.

Last week corn prices declined the last three days on the Chicago Board of Trade. It is only in the Monday morning electronic trade before the pit opening that we have seen an upturn. December futures put in the recent high on October 23^rd at 4.13-1/2, then declined 54 cents in a few days. The futures then bounced 39 cents by the 4^th. We closed the week at 3.66, but are now trading 3.72.

With the November soybean futures now into the delivery process in Chicago, we are looking at January beans. The perceived catch-up in the harvest caused steep declines last week. We nearly matched the recent high on the 4^th, at 10.22-1/2. (We were 10.29 ten days earlier.) Three rough days on the market as the combines ran got January futures to a Friday close of 9.55, down 67 cents in three days. Overnight we have got that back to 9.62.

I expect the market to be shocked by corn harvest numbers that are still in the 50 percent range. This would be part of the explanation for the bounce overnight. However, improving weather will mean the delayed harvest has just about run its course in the attempt to push prices higher. The rain later in the week came out of the forecast this morning. A good week puts the crop in the bin and the reality of the huge crops back in the spotlight.

 

 

 

 

 

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

Slow harvest, fast market

Dece3mber corn futures gained nine cents in the last five minutes of trade Monday. Traders seemed to be reacting to fears of lack of harvest progress. USDA released new harvest numbers after the close that seemed to confirm the bullishness.

December futures had a 24-cent range from high to low Monday. We had a spike high ten days ago (Octoberer 23^rd) at 4.13-1/2 December futures, but a low Monday of nearly 3.59. The high, just before the close, was nearly 3.84!

November soybeans had a 44 cent range, posting a 10.06-1/4 high. We were back to 9.89 when the overnight session closed, but that was more than a dollar above the October 5^th low of 8.78-3/4.

Prices have been volatile lately, and much of the bouncing around has to do with the deferred reality of the record bean crop and near-record corn crop we are trying to bin. This week again we made little progress on the harvest, and now it is November. The Halloween trick this year was continued rain that allowed intermittent field work in some areas, none in others.

Passed onto me via e-mail yesterday were a series of photos of a harvest near-disaster. It showed a tracked grain cart buried in the mud on one side badly enough that the track was out of sight and it was nearly tipped over. Two four-wheel drives and a track hoe were being used to excavate it. Maybe that is "extricate" it, but the first is closer to reality.

The reality of this harvest has yet to be realized. Do we have over 13 billion bushels of corn if three-quarters of it is still in the field the first of November? What are the harvest losses going to be? What about yields 20 bpa less than last year, with much of the loss being in lower test weight? What about vomotoxin problems that have corn in some areas being limited in where it can be sold? What about even ethanol plants with vomo problems as they try selling DDGS that has a vomo test of 15 parts per million?

The questions continue. What about soybean harvest losses? The farmers can't be getting all of them in the mud. The Delta farmers are losing theirs completely with flooding. So, is this a record bean harvest or not?

USDA provided some insight in the harvest progress numbers, but the January Inventory Report may be the real market mover. The government has the corn crop only 25 percent harvested, up just five percent from last week. That is less than half where we were last year, and the normal is nearly three times that, at 71 percent. By now it is normally only the northern areas that are not done, like in NE Ohio and NY. This week Ohio was spot on the national average, at 24 percent. We gained seven percent from last week, but lagged last year's 68 percent and the normal 60.

When you think of corn, you think of Iowa, and they are worse off than us, as is Illinois. Iowa has 18 percent of the corn off, and Illinois is at 19.

The lack of corn progress can be blamed on the slow bean harvest. The corn is standing. Snow will soon take down the beans. The U.S. is still only 51 percent harvested on the soybean crop. We cut seven percent last week, but normal is 87 percent, with only the Delta usually dragging any big acres.

So, the tale of this harvest is not over. We will be talking about it for years, and the markets will be reacting until well into next year. I continue to think these harvest delay bounces are selling opportunities. Sometime next year we will know if I am right.

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