Boys will be boys, and one of the boys in the elementary of the old New Lyme Deming School used to bring a ball bearing to class. I remember how surprised I was the first time I saw it bounce.
There is something counterintuitive about steel bouncing. Rubber balls bounce, but steel balls bounce higher if dropped against a resilient surface, such as the concrete in the Deming basement cafeteria.
If dropped on the old wood floor upstairs, the wood absorbed the energy in the falling steel, but the firmer floor allowed the ball bearing to do its surprising work. I think of this on Tuesday morning, Aug. 16, a couple of trading days after USDA released what is known in the business as the WASDE, the World Agricultural Supply and Demand Report.
Negative numbers
Just about everything in the report was seen as negative to prices. The numbers were worse even than expected.
Firm floor. Prices dropped sharply for an hour. Then, they bounced back. Prices on the Chicago Board of Trade seem to have found a firm floor, firm like the concrete under the old Deming School.
I will stick my neck out and say that the harvest low might be in, this far before harvest. The worst news we can anticipate has come and gone, and we survived it. Friday at noon Central Time USDA threw bad news at us, but in a little more than an hour the market reacted, went sharply lower, and bounced back nearly to even.
Monday, Aug. 15, prices went higher, and put the lows in the rear view mirror. November soybeans took the news of a 48.9 bpa estimate and a 3.929 billion-bushel crop and digested it.
The average trade guesses going into the report were 47.5 bpa and a $3.941 crop. Prices were briefly down nearly 20 cents, but did not make a new contract low. The November futures low was $9.621⁄2, but within an hour it was back nearly to even.
The contract low had been at $9.43 on Aug. 2. It closed at $9.813⁄4, down two-and-a-quarter. Monday, the November was up 27-and-a-half, and followed that with a gain Tuesday, so far, of another four cents.
Corn market
The corn market did not bounce as well, but it bounced. Friday, the December corn futures opened at $3.311⁄2, then dropped nine cents to a new contract low. At the close, however, the December was up to $3.33, actually a gain of one-and-a-half cents for the day.
This Tuesday morning, Aug. 16, we have lost a little of that and are trading at $3.281⁄2. The corn markets were trading the USDA estimates of a 175.1 bpa yield and a record 15.153 billion-bushel crop.
The average trade guesses had been 170.6 bpa and a 14.757 crop. The soybeans come out of the day looking better than the corn on the USDA sheets. Exports have been outstanding, and USDA expects that to continue.
Even with the bigger crop expectations, USDA increased crush estimates by 10 million bushels and increased export expectations by 85 million bushels. The net was a drop in the expected carryout of 95 million bushels, even with the bigger crop.
Carry is now estimated at 255 million bushels, and the traders expected 320. That one number is a big reason for the price bounce.
Wheat prices
The soft red winter wheat prices have been mostly sideways through this excitement, although the September futures dipped along with the other grains Friday.
September wheat opened at $4.16 Friday, dipped to $4.06, then rebounded to close at $4.221⁄2, up six-and-a-half. We are trading at $4.19 as this is written.
The backdrop of the grain markets is that we are experiencing great weather this summer over most of the growing region. The exception to that has been in Ohio.
Rains arrive
Locally, we were dry for a couple of weeks just as pollination was finishing. Recently we have seen scattered, but generally heavy showers. More rain is still forecast this week.
This rain comes too late to return the crops in north central Ohio to normal. It may return extreme northeast Ohio to the best crops ever. Ohio soybeans need rain in August to fill pods, and it is now getting it.
We can hope that most Ohioans are better off today than they were ten days ago. The corn balance sheet did not come out as well. USDA increased exports by 5 million bushels, and increased exports by 25 million bushels.
They dropped ethanol use by 25 million bushels, however, and the net result was an increase of five million bushels in carryout, to 1.706 billion bushels.
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