Long weekends trigger grain market jitters

There is a long history of long weekends making markets nervous. Traders don’t like the idea of commodities being unhedgeable for three days instead of two. It takes away some of the sense of control, knowing that there is nothing they can do to make money or hedge risk while the market is closed.

Traders who might carry a position over a two-day weekend might get even for the three days. This might represent a sell-off on Friday and a buy back Tuesday. Or, it could work the opposite in a down market. Overnight trading has lessened the tendency for big days after long weekends, but the possibility, and the hope, remains.

This Tuesday morning, Sept. 8, we are trading again after a long weekend, and we have all three major grain commodities strongly higher.

December corn futures are up five cents at 3.68 after trading near the contract low Friday. We got as low as 3.60 1/2 Friday. The contract low was back on the 12th at 3.57 1/2. This morning we are currently more than a dime above that.

Soybeans are in a similar position. The November contract low was 8.55, and we got to 8.65 1/4 Friday. This Tuesday morning we are nearly nine cents higher, trading 8.75 1/4.

The Chicago wheat futures have been sliding to new lows. The new contract low made Friday at 4.63 has held, and we are now up eight cents at 4.75 3/4.

Real or temporary

So, the markets are higher and we need to figure if this means anything for a trend, or if we are just using the long weekend to put in a temporary rebound. There are reasons for a rebound, and if we stay higher, these are the reasons that will be cited.

The USDA is a day late with Crop Progress reporting because of the holiday. Normally I would report the numbers here, but we will just get them this afternoon. Traders expect the corn to decline 1 to 2 percent. They expect the report to cut the bean condition two percent. Crop conditions are expected to be lower because the weather has been a little wet in the West and continues to be dry in the East.

As I said last week, our crops have given up and are drying toward harvest. Some beans are actually coming off in central Ohio, and I heard a report of an early corn field being shelled in Ashtabula County. Dairymen are hurrying to finish chopping corn before it gets too dry in my area, and I hear that chopping has already stopped elsewhere.

USDA will release its Supply and Demand Report Friday, which will include critical crop production estimates. We are currently reading of private estimates that are preparing us for that report.

The world report will be interesting, as the EU is already saying their corn will be off by 10 percent. To counter this perceived world demand, we have China saying they will reduce their support prices and provide transportation subsidies to move corn to where it is needed. This is thought to probably cause a severe cut in U.S. exports of sorghum, barley, and DDG’s, for next year according to CHS Hedging publications.

Fear of China’s withdrawal

Common sense tells us that the Chinese, facing a melt-down of their equity markets, are trying to do what they can to keep their money home.

I remember going to national meetings in the ’90s when the talk was always about how happy days were here as soon as the Chinese finally bought corn and beans. They have bought heavily for the last two decades, and now we are left with the fear that it will go away.

Also going away are exports of ethanol, which has now had four straight months of export declines. The exports were off 6.7 percent in June.

So, the market tries to stage a rally based on a smaller crops for this year, but the markets for next year are looking to put a cap on gains.