Good weather means more poor prices

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Ohio corn
A field of Ohio corn in late June.

Weather and U.S. Department of Agriculture Crop Condition Reports continue to define the grain markets on the Chicago Board of Trade. Good weather continues, especially with moderating temperatures that are taking the threat of stress out of the crops.

Crop condition ratings continue to be very good. The corn repeated last week’s rating at 72 percent good and excellent. That is 8 percent better than this time last year. The soybeans gained a percent, to 70 percent good and excellent.

As a result of weather reports and USDA ratings Monday, July 23, grain crops start this Tuesday morning in the dumps. December corn futures are down 4 1/2 cents. November soybean futures are off 5 cents.

Wheat futures

Even September wheat futures, with the wheat already mostly in the bin, are down over a nickel. USDA puts the winter wheat harvest at 80 percent now. Monday, the extended forecasts both showed moderating temperatures that would be below normal for the Corn Belt.

Since normal temperatures this time of year are a little too high, this is good for a corn crop that has mostly gone through pollination. These price adjustments come after a week to 10 days of rallying prices.

Until today, corn futures had been up for seven seasons. Beans had been higher five of the last seven trading sessions. The Chicago wheat had been on an eight-session rally.

In the process of rallying, the corn had gained 16 1/2 cents from the new December futures low of 3.50 1/4, made July 12. November soybean futures had gained 31 1/2 cents from the 8.26 1/4 low of July 16.

Export pace

September wheat futures had gained over 37 cents since the 4.71 1/4 low July 11. Exports pace is not helping. Until recently, corn exports were thought to be likely to make USDA projections. USDA was anticipating a five percent increase in exports from last year.

In fact, we are now 4 percent lower than last year, and lagging, even with these cheap prices. The soybean exports are also off four percent from last year, but that is just where USDA projected exports to be.

Just to add a little more negativity to the soybeans, the Brazilians have raised their production estimate slightly, buy .3 mmt to 118.7 mmt. The bright spot in this marketing dark cloud may be that the market is now inclined, or at least prepared, for higher prices.

Contracting futures

The specs are now short over 134,000 contracts. This leaves them ready to jump the other way if there is ever a reason. One reason may be that some traders think the market has already discounted a record large yield.

This remark comes from a CHS Hedging letter out Monday. In the case of soybeans, however, the recent rally may have just been a blip in a negative market that is defined by Chinese and American tariffs and counter-tariffs that have shaken market values.

We have seen a drop of over two and a third dollars in the value of soybeans, with a modest rally that has been shaken off at least this morning. The lower trade this morning represents a gap on the chart, so now the gap becomes resistance to going higher.

The spring wheat crop is now rated 79 percent good and excellent. That is off one percent from last week, but still a historically high number. It is the best rating since 2010.

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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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