Grain market stable and looking for news


With no game changers popping up, the markets have achieved a little stability at high prices. Prices are bouncing around, but seem to be bound currently within the recent range, looking for any change in fundamentals to move it around.

For example, soybean prices were down sharply Monday (Aug. 6) on the idea that we got more rain over the weekend than expected. By today, Tuesday, the talk is more about how the rain is too late since the crop is two or three weeks ahead of normal in maturity. So, prices have recovered some of the Monday losses.

Wide swings

November soybeans had a high back on July 23 at 16.91 1/2. The next day, we dropped to as low as 15.52 1/4. Pretty dramatic! Since then, we have focused on dry weather and traded higher.

The end of the month, we were back to 16.63 3/4. Monday changed that, with a low of 15.75-3/4 and a close of 15.84 1/4, down 44 1/2.

If you do the math, that means we were off 53 cents at one point. This does not exactly describe a market that is “stable.”

Still, it is within the wide trading range we have been working on. We have never actually crashed, but we have some wide swings.

$8 corn

The corn, meanwhile, is staying within a much more narrow trading range. The most significant number to remember is that December corn futures are staying above $8. They had a high of 8.17 3/4 on July 30, a high of 8.20 1/2 on the 31st, a high of 8.17 on Aug. 3, and a close of 8.05 on Monday.

So far on Tuesday early trading the high is 8.07 1/4 and we are trading currently at 8.05 1/2.

I have carefully neglected to say anything about old crop corn and beans. The reason is simple: There is no reason on earth why a farmer should still own any old crop unless he is feeding cows and worried about feed for next year.

We have made new all-time highs several times, and all the old crop should be gone. I will not waste my time telling farmers to sell it, since they have not taken my advice so far. Is that blunt enough?

Crops still hurting

Monday afternoon the trade always looks at the USDA Crop Progress Report. The Crop Condition pages get the most attention. Yesterday, they showed a continued slight decline in conditions for what are already poor crops.

The corn crop is rated 20 percent good and 3 percent excellent. Last week, we had 21 percent good. Compare that with last year at 60 percent good and excellent, with 15 percent of that excellent.

The soybeans were at 25 good and 4 excellent, compared with the 26 plus 3 of last week. Last year we had 61 percent total.

Now what?

Price direction from here is not clear, but one thing we know. In short crop years, we make the high before harvest, then go lower.

This is still a long way before harvest, but these astronomical prices are cutting demand and encouraging imports of corn.

Last month we had the announcement of nine cargos of corn coming into the Southeast from Argentina. Already they can deliver corn to the hogs down there more cheaply than we can from the Midwest. There is a limit to high prices.

As we move to harvest, we will have convergence of basis and convergence of futures prices. That is, the price of the old crop becomes the price of the new crop at some point. And, old crop basis becomes the same as new crop basis.

We are already seeing serious erosion in old crop basis. My corn bid, for example, has dropped 15 cents relative to futures, and that will continue.

If you are plus ten September for the old and minus 55 December for the new crop, the old crop is going to get cheaper as it gets closer to harvest. That process is already well under way.

So, some of the volatility has gone out of the market as the fundamentals have become more known. Prices are near the all-time high, which we just made. The markets are waiting for harvest news, which is likely to be that the crops came through and are better than expected.


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