Erratic grain markets after USDA reports

USDA cut the corn and soybean crop estimates in the Aug. 11 Crop Production Report, but the market has had two minds about the numbers.

Initial reaction was for higher prices, then lower prices, then higher prices. This morning, Tuesday, the mood seems negative again.

USDA now puts the corn crop at 12.914 billion bushels. As the report came out, that was considered bullish, since trade estimates averaged 13.083 billion bushels, significantly higher. The July USDA estimate had been 13.47 billion bushels.

So, the market reacted with limit up corn prices on Thursday, but they did not lock limit up. There was trading all day. The December futures closed up 25 1/2 cents.

Short-lived party

The big news was that the new crop corn made a new high coming out of the report. The December futures hit 7.24 on the 15th, Monday, three and a half cents above the June 9 high.

That was not true of the old crop corn. September futures missed a new high by a whopping 58 cents. The 7.08 high on report day was nowhere near the 7.64 of July 9th.

The old crop party is over, and the old crop needs to be cleaned up.

The corn has not showed much follow-through, and that is significant. We worked a little higher, but this morning we are now down nearly seven cents.

Ho-hum

This market feels like it has absorbed big news without a big market move. Some traders think we would have gotten more oomph for our money if the money men were not being too beaten up by stock trading right now to put money in commodities.

Soybeans

The November soybean futures, meanwhile, did not make new highs in the November new crop futures. There were nice gains, but the high was made immediately after the report.

The report day November futures posted a high of 13.53, but are trading now at 13.43, which is down nine cents overnight. The old high was at 14.08, so we missed it by 55 cents.

Is USDA right?

Arguments can be made that USDA is still too high on the corn estimate.

USDA says we will have the third largest crop on record. Of course, these arguments for lower production are made by some of the same traders who thought the crop was bigger than the USDA estimate. These traders think the 153 bpa yield, reduced from the July estimate at 158.7, is still too high to reflect the strain put on the crop by recent high temperatures and dry weather at silking.

Traders are also still dubious about the acres. USDA had promised a revision, and we got one. Trouble is, the revision left the total acres the same.

Ohio uncertainty

Ohio traders are finding it hard to believe that we have more acres this year than last, after some acres were not planted in the wet, delayed planting conditions. USDA says Ohio planted 3.32 million acres this year, 3.270 n the fast spring of last year.

USDA did drop soybean planted acres slightly to 75 million, versus the 92.3 million for corn.

Remember, before the ethanol impact on acres, the two were close to the same. Soybeans production will be down 8 percent from last year, which is what is maintaining prices.

Now what?

Where does that leave us on marketing decisions? I think the excuses that the crop might not be planted, then might not get mature are now just excuses.

This is the time to look at $7 corn futures near the end of summer and bet that this might be the high of the year. This is starting to feel like a short-crop kind of market, with the high price at harvest or before. Then, the market rations supply and prices ease off.

The last time we saw this we did not get higher prices because the winter and spring were filled with ethanol talk as the industry boomed into increased production and corn demand. That will not happen this year. The industry is trying to deal with having enough production for 10 percent blends, and no demand for the 15 percent that has been authorized.

The boom in expanding production is over. We are seeing some contraction.

This is the time to sell, baby, sell.

About the Author

Marlin Clark trades producer and elevator grain from an office near Andover, Ohio for Town & Country Co-op. You can reach him for comment at 440-293-4055. More Stories by Marlin Clark

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