Disappointing grain trading and confusion before the report


Once again, I am forced to write about a major fundamental event that will have occurred by the time this is read.

As I write on Tuesday morning, we are looking forward to what could be an interesting USDA Crop Production Report. By the time this is pulled from your mailbox on Thursday, the report will be news, not speculation.

A week ago, I let myself be persuaded by a colleague that we would see new highs before the crop report. Instead, I have watched the market go down.

Then there were three theories about what is happening on the Chicago Board of Trade.

First, we would make new highs before the report. Second, we would make new highs after the report. Third, we saw the high a week ago.

I am just like any farmer I have ever met — eager to believe in any theory that would suggest higher prices. Now I have watched a large break, and want to believe that we will have new highs after the report.

A big deal

Thursday the 11th, USDA will release the August Crop Production Report. Since the direction of the market for the remainder of the crop year depends mostly upon the size of the crops, this is a big deal. It is especially big because so many traders were dubious about the planted acres USDA used to calculate the July report.

Ohio traders, to a man, thought the acres were too high, especially for Ohio.

The concerns were simple. USDA claimed a 5 percent gain in acres nationwide. This came after a record-set spring in which all the talk was how many acres would go unplanted after the June 4 insurance deadline.

The slowest major state was Ohio. Yet, the report showed Ohio having 50,000 more acres than last year.

This supposed confusion in the acres makes it easy for traders and producers to dream of the day when reality hits the markets and we make new highs. So far the reality has been different.

This is the week of the “debt deal,” Washington’s temporary solution to a permanent nightmare. This is the week that Wall Street falls into the gutter and Europeans pull money out of anything American. Some of that American investment was on the Chicago Board of Trade.

This is the week that international buzz what that the American currency would no longer be preferred. Maybe that is why we spent the week going down instead of up. Or, maybe USDA is somehow right and we are overpriced on grain for the real market.

Futures down

December corn futures nearly broke into new territory before going lower the last few days. Corn was the strongest commodity. The December hit 7.15 3/4 on the 2nd, just off the June 9 contract high of 7.20 1/2. It is currently trading 6.87 1/2 going into the Tuesday morning session, after a Monday low of 6.81. So, December futures lost nearly 35 cents after being close to a new high.

This is a different pattern from the old crop September futures. There, we have a pattern of lower highs that defines a downtrend. The old-crop hype that had us running out of corn is going away.

The prices are lower and basis is falling like a rock, as the market is switching from begging for corn to wondering where to put the last of the bushels.

The pattern is defined in the high of 7.64 on June 9, then the high of 7.22 1/2 on July 19, and then the high of 7.11 1/4 on Aug. 2.

November soybeans, meanwhile, have been mostly on the defensive. Maybe the acres are too low there. Maybe the rains and moderating temperatures have pushed the crop to catch up, and made yield prospects better.

Whatever the reason, soybeans lost $1.04 on the last cycle, and a bounce of 11 cents to 13.11 November does not make it look better.

The wheat has been a different proposition, as it is coming out of harvest. Prices have been mostly sideways since the September futures low of 6.10 on June 1.

We rallied out of harvest to 6.80 in mid July, confirmed the high in early August at 6.75 1/2, and are trading just under 6.60.


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Marlin Clark is an associate of Russell Consulting Group, with a local office in Williamsfield, Ohio. Comments are welcome at 440-363-1803.



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