The contra-seasonal market that has made new highs during harvest has finally broken down in the last week. December corn futures lost $203⁄4 for the week, and January soybeans lost $243⁄4. Given how high we have come, this is not a big deal, although it seems like it.
Worse for corn
It must be noted that, given the price levels, the break in corn is a lot worse than the break in soybeans. Corn has been pressured by the fact that prices have been rising at an unusual time, and reality required a break.
It has also borne the pressure of farmer selling in some areas as the harvest has finished and some of the corn had to go to town because of good yields. At these prices, that corn got sold.
Additionally, the rise in COVID-19 cases is focusing attention on the same factors that gave us $3.20 corn futures not that long ago. More pandemic, more business closing, less driving, less demand for corn to make ethanol that is not needed, given the decrease in driving. So far, the driving is actually being maintained at about 90% of normal, although we had gotten to 93% by some reckoning.
Soybean prices have been somewhat supported by the late planting of soybeans in Brazil. It has been too dry, so they have delayed planting. Scattered rain has helped them catch up, but it is still seen that their harvest will be delayed, so our beans may be needed for exports a little longer.
Normally we would see the foreign buyers turning to South America by the end of January. It is thought that corn prices could continue to decline as the large speculator position may get lighter. The specs have been long over 300,000 contracts, the largest in 10 years or so. It is easy for them to reverse positions on this current break. The soybean specs are long 190,000 contracts, which is not historically large and has not changed for a week or so.
The harvest was very slow this last week all over the country. General rains and snow in the northern areas limited field work. The nation gained 10% on the corn harvest, but only 4% on the soybean harvest. As of Sunday night, USDA says 87% of the soybeans are off, which is ahead of the normal 83%. Ohio only gained for four percent, to 77%, and that is well behind the normal 86%.
The country has 82% of the corn harvested, way above the 69% average. However, Ohio is only at 41%, against the normal 65%.
It is interesting to remember how last year’s late harvest affected us. The five-year averages were hurt by the deluges that gave us corn planting in June and harvest in November and later. The rebound to that this year gave us an early start to corn and soybeans where possible.
Much of the Midwest has weather forecasts for this week to be without much chance of rain. This will allow the principal growing areas to finish harvest and will allow Ohio to make a run at catching up.
It should be noted that some growing problems this year have affected the sales patterns we normally see as far as basis. Iowa is having a disaster year, with a serious drought, then the derecho storm that flattened a large area of corn.
As a result, basis at Iowa ethanol plants is already positive, and rumors of expected huge financial losses in the elevators are surfacing. The elevators are not getting much corn, and the ethanol plants are getting what there is.
On the other end of the Corn Belt, Pennsylvania is having a bad corn crop after a dry summer. I hear talk of 50 to 65% of a crop in Central Pennsylvania where the soils are not deep, and they have limited soil moisture capacity. This is resulting in an increased need to draw Eastern Ohio corn.
Pennsylvania is normally very deficit corn, as they feed much more than they produce. That is worse than normal this year. The ethanol plant at Clearfield, which dominates Eastern Ohio corn values, has suddenly pushed published basis by 15 cents to plus 50 for all months.
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