The drought weather market of 2012 has continued, with emphasis shifting back to soybeans once again.
Last week, we made new highs in corn, but not in soybeans. Yesterday, Monday (Aug. 20), we made a new all-time high in soybeans, but the corn is still 20-some cents off the recent highs.
The Aug. 10 USDA Crop Production Report sparked a 15-minute spike in prices until reality set in. That set the top, at 8.49 December futures and 8.43 3/4 on the September.
By the following Monday, we had seen a low 63 cents lower, at 7.86. We have now come back to as high as 8.23-3/4 September in early Tuesday trading. The December was back to 8.31 1/2 at the overnight high.
The soybeans, on the other hand, actually did break the top this morning early. The old November futures high was at 16.91 1/2 on July 23. We touched 17.15 this morning.
Meanwhile, the wheat got back to within 8 cents of its July high of 9.53 1/4 on Aug. 10, but we are now trading 9.10 December futures.
Reports from field. The big bounce Monday, and now again on Tuesday morning, is being credited to the Pro Farmer Crop Tour that is in progress this week. Yesterday the tour started in Columbus, Ohio, and moved west. The results were predictable and ugly.
Pro Farmer is saying that the Ohio corn yield will be just over 110 bpa. USDA in its weekly Crop Condition Report says the beans are marginally better with some rain. Pro Farmer still talks mostly of low pod counts.
Agronomists say it is too late for rain to make much difference to the beans.
Early harvest
Hard to take this early in August, but talk is also of early harvest of corn and beans being under way. Louisiana is 11 percent harvested on the beans, Mississippi is 6 percent done.
USDA issued the first harvest report, saying that we were 4 percent done Sunday night.
The early harvest might be contributing to the old-crop/new crop spreads. Early in the rally, the nearby contracts led the markets. Recently, it has been the December corn contract.
With early harvest taking the pressure off the idea of running out of corn, we can now just worry about the new crop. At some point we will wonder if the carryout is still too high because we used some of the current crop up before the current crop year officially started.
Corn imports
That the highs in corn have held has a lot to do with ideas of limiting demand. Not much talked about by farmers, but noticed by the trade is the unusual importing of corn taking place right now.
Southeastern feeders have banded together to get Brazilian corn into Norfolk. Nine cargoes were booked more than a month ago. This month, the talk was of Brazilian corn coming into California for the dairy industry concentrated there, away from our mainstream supply.
It is ugly to think that ocean freight from Brazil can be cheaper than rail freight from the Midwest.
Ethanol waiver
What is being noticed is that the government has stopped just posturing about the ethanol mandate. EPA has now officially opened a 30-day period for comment on whether the mandate should be waived. This would mean that refiners would not be required to put 10 percent ethanol in their gasoline blends.
The consensus is that if the mandate is suspended, corn prices would drop as usage in gas would drop. I am in the minority here. I think the ethanol might stay in the blend until it is much higher cost than the gas. As long as it costs the refiner less than gas, it is a no brainer. Even at slightly higher prices there are reasons to use it.
Although the lower BTU content lowers mileage, it is the cheapest way to enhance octane.
If the mandate changes and the refiners did go to less ethanol, the result would be the total stop to the rally and a retracement, looking for a demand-driven price.
Some time in the future we will look at the charts and have reasons why prices changed at a certain date. What we know is that the prices cannot just go up.
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