Rain markets break from highs

Prices on the Chicago Board of Trade have broken sharply on the overnight trading going into Tuesday morning (Aug. 24), as this is written.

Corn, soybeans, and wheat have all traded dramatically lower, leaving the highs of the last few days behind.

I had to do some quick mental calculations when K-2 called from the Farm and Dairy for my prices this morning.

We publish prices based on the close of trading at 2:15 EST Monday. Those have now gone away. On Thursday the readers look at those prices and have to be reminded of the disclaimer that the reader has to confirm them with the buyer.

(K-2 is not to be confused with the second highest mountain in the world. That is the sobriquet I give Kristy Foster, the second reporter of that first name at this paper. Thus, K-2, get it?)

So, this morning corn is down almost 8 cents, the beans are down 7, and Chicago wheat is down more than 12 cents on the lead month.

No easy answers

K-2 wonders if I know why. I wish I did. The easy answer is that the USDA Crop Progress Report out Monday reinforced in traders’ views the idea that the corn and bean crops will be records. The corn progress is still record early, and the bias is still that an early crop is a record crop.

USDA says that, as of Sunday night, 88 percent of the corn is in dough stage. Ohio is rated at 91 percent, up from 82 last week and way ahead of the 71 percent of last year.

Crop reporters admit that there are a lot of holes in some fields, but they are confident the bushels are there. This week, it is hard to argue against that.

The thinking is that we have good demand, but maybe not enough to support the current prices, so let’s break them a little.

Prices were supported by the stronger dollar, but that has gotten weaker.

Look at corn

December corn futures rallied to the spike that the wheat rally caused. That was 4.38 3/4 on Aug. 5. We broke to 4.10 in six days, but rallied back to the high.

December corn traded 4.37 1/2, 4.37 1/4, and 4.37 1/2 on Thursday, Friday, and Monday.

Take a look at the chart — that makes a strong argument for a top after the break to 4.22 overnight.

Things are similar over in the bean pits, er, on the bean computers. (This electronic trading has me wondering what the Board of Trade looks like these days.)

The beans had a 10.49 November futures high, then broke to 10.11 1/2. The bounce was right back to 10.48 1/2. Now we have traded lower three days to the overnight low of 9.96. Again, this looks like a top.

The December Chicago wheat futures came screaming off the 8.68 high of the 6th to hit 6.77 1/2 on the 18th. We are now trading 7.14 again, with no idea of a return to the highs.

Crazy. Make your arguments. What could happen this late in the season to give us new highs? Only a serious surprise in yields at harvest, which is just around the corner for some areas.

What could give us sharply lower prices? Confirmation that the uneasy fears that have supported the market are unfounded.

That is the long version — my attempt to explain the break this morning.

The short version is simpler. When K-2 asked why we were lower, I said, “I don’t know.”

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

One Comment

  1. ARC says:

    A quick search for “rain markets” did not turn up any results on the main page of Bing except for this article although several results came up for cap and trade. A second search for “rain market definition” also turned up no results, however, “rain check” was the top result. This causes a problem for people like me since I actually hope there comes a time when there is a market for rain to be traded. I am currently unaware of such a market, although cap and trade and air pollution came up on the front page of both search results.

    So, my point is, would Mr. Clark please refrain from such a phrase so as not to upset the internet continuity that a rain market actually exists because it could spawn rumors that the rain from the sky ain’t free and the reason you ain’t got no rain is that you ain’t paid your membership dues to the rain market which includes a small check off as to make sure that rain falls on your farm in beneficial (and non-detrimental) increments. Maybe Mr. Clark IS trying to start a conspiracy theory!!!!

    Too bad to hear about the corn and beans going down. One of these days, we’ll hear about rain going up (and not to hail).

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