Grain market crash takes a breather


Prices have dropped sharply on the Chicago Board of Trade, but the slide may have stopped for a moment.

Cash grain prices have been hurt recently by the news that USDA thinks we got as many acres of corn planted as they predicted in the March 28th Planting Intentions Report. In addition, the switch by traders to the September contract for pricing as we got to First Notice Day meant that the effective basis dropped sharply.

USDA reports

Let’s look at the USDA first. Traders are focusing this week on the reports USDA will release at 11 AM CT. They will give us the Supply and Demand Report and the July Crop Production Report. Traders will be comparing those numbers to the ones implied in the Grain Stocks and acreage report of June 28.

That day, USDA gave the traders who thought we were a couple of million acres or more short on planting, a surprise. USDA reported that the acres were all in.

Now, that could have meant that we planted more than expected in the Eastern Corn Belt, because the general understanding was that the northwest was never planted, especially in Wisconsin and South Dakota.

Or, it could mean that USDA was wrong.

Market reaction

In principal, the market has to trade the USDA numbers until private forecasts line up enough to cast doubt on them.

As a result, December corn futures were down over 27 cents on that report day, and continued a slide that lasted until Monday.

The recent December futures high was on June 3 at 5.731⁄2. Again on the 19th we got up to 5.71. The low was Monday the 8th at 4.90 — an 831⁄2 cent loss.

The good news was that the market rebounded Monday and closed above the significant number of $5 at 5.001⁄2. Follow-through this morning (Tuesday as this is written) has us up 101⁄2 at 5.11.

Soybeans had actually been going up until recently. The high was at 13.33 on June 7 for the November futures contract. The low was down $1.08 at 12.25 on Monday, July 8.

That is an ugly month.

But, the market put in a key reversal Monday, and closed 30 cents off the low. This morning we have 23 cents of follow-through and are at 12.751⁄4.

Easy does it

So, it is easy to look at the charts and get bullish again. Caution would lead us to remember that we can always expect a bounce, and maybe a retracement.

In my mind, there is no real bullishness unless USDA surprises us again.

Monday brought us USDA Crop Condition Reports. The market was expecting significant improvement in corn and bean condition. It got a gain of only 1 percent in corn, to 67 percent of the crop rated good and excellent.

The soybean condition was reported at no gain, which was a disappointment.

Weather market?

We are in that dangerous place where the market thinks rain means grain, but we have really been too wet and too cool for good corn over most of the Corn Belt.

Maybe this seems more of a problem than it is, since I am living in the cool and wet area. I am wet enough that I can’t mow lawn, and the yellow low spots in local corn fields are not improving. They are now permanently stunted.

This is the middle of July and we should be seeing sunshine and 85 degree weather.

Last year we were crying for rain, and ended up with good crops. This year we are crying for sunshine, but still may end of with good crops.

My hope for great crops, however, is gone.


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