Prices have broken sharply on the Chicago Board of Trade the last few days. The perception of a good crop and outside markets continue to ravage what was a welcome rally.
Monday trading was an example of how bad it gets when the speculators run out on the market. Soybeans were down 27 1/2 cents nearby and down 25 cents in the new crop. In the process, they broke the perceived support line of around 9.75 November futures.
USDA reported soybean planting at 91 percent for the country in the Monday report, ahead of normal and last year. That last market checkpoint has not been passed, and we will see no support from delayed planting, even with the rain that will continue to delay the last acres.
July corn futures lost 14 cents, and closed just above the support line.
July wheat futures lost most of a dime, even as traders are talking up possible disease problems in the Chicago soft red crop because of heavy rains.
Eyes on the sky
The rallies of the last two months have been fueled by speculators adding to positions as they expressed concern with late planting of corn and weather problems in general.
When the dry weather returned and planting caught up, the mood switched to fears of dry weather. Now, most of the Midwest has too much rain. That is a worry for wheat, but traders see it as being good for corn and beans.
“Rain makes grain” is the cry in the pits, and until the rain reaches the near-Biblical proportions of 1993 (is that the right year?) that cry will continue.
That the rain is a problem for wheat is the talk now. The area around our Mifflintown, Pa., office has had 10 inches of rain in the last few days. It comes at just the wrong time for wheat and may promote scab disease to a nasty level.
Jon Hart, our trader there, is worried some areas will have yields cut in half. The question will linger for a couple of weeks here until we see how widespread the damage is.
Will Ohio, the largest soft red winter wheat state, see significant damage, or have producers just had enough rain to fill out the wheat? What will be the difference from southern Ohio to the north, with the change in maturity? The exact state of growth when the rains hit is the critical matter.
Looking at the prices, we see wheat futures on the CBoT have had a steady downturn since the first of June. The July futures high was 6.77, and we hit recent low overnight this morning at 5.41. That is down $1.36 in three weeks.
A lot of this would be a seasonal loss, as we are in harvest in the hard wheat country. So far, there is no recovery based on scab damage.
July corn futures exhibit the volatility that has farmers discouraged. Those who were waiting with the last bushels for $5 are now begging me for $4, and I am at 3.75!
July futures hit the recent low of 3.70 the end of April. It was a slow climb, pulled by beans and delayed planting, to the 4.50 high of early June. In the next three weeks we lost 70 cents, hitting the low Monday. Overnight we have bounced a nickel.
The July soybeans have led the inverted (early months higher than deferred) market. With only two brief dips, the beans gained $4.50 from early March to the June 11 high of 12.91 1/4.
Since then, we have broken the price $1.41 1/4 to the Monday low. We traded 14 cents off the low in the overnight.