The fond hope of the Labor Day weekend was that, with an extra day of mystery and no trading, we might see some gains as we started the trading week a day late. Frequently, a long weekend sparks some trading and changes prices. Fond hope, faint gain.
The November soybeans are up five and a half cents, but corn is up 3/4 of a cent, and wheat is up one and a half cents. So, we are back to looking for hope in other directions, and all four major directions have already been tried.
This is the time of the year when the die is cast. It is too late for much to happen to the crop. We can’t burn it up, we can’t improve it much, although timely rains continue to fill bean pods. What we have is what we get, on the fundamental side.
There is the legitimate idea that the crop is over-estimated by USDA. That is another fond hope, that the early harvest will be disappointing. If you believe that, and put me cautiously in that category, you would not be surprised by a rally in early harvest that would confirm that the recent declines to new contract lows in corn, for example, are actually the harvest lows.
This is not an idea that you bet the farm on, but if you have held off selling new crops, or even if you are still storing old corn, it is the only idea you have.
If you own old corn, you have a lot of company. Some of you will be stubborn and hold it through, figuring that corn will be worth $4 some time. This magic number is why you are still holding it.
In fact, if you do hold it over, you have to make the commitment of living through the transition to new crop basis. That is, corn that was worth 20 cents under December futures is now worth 35 under, and falling. Futures can gain 20 cents and the cash price will gain nothing. It will take a while for basis to recover enough for you to get what you could have had in August.
When will corn harvest start?
We still wonder just when harvest will start. I sell into the Pennsylvania markets, and some of the buyers there expect to be able to get new crop corn off the Shore and from Virginia in the first week of September. Some figure there will be harvest then, but the corn might not flow freely until the last week of September.
Whatever, the eastern Ohio buyers have already changed bids to reflect that the old crop party is over.
It is true that basis may not crash this fall. Crop size will be good, but not great. And, the harvest will be stretched out. This gives the market time to absorb the crop. Early sales will ease the burden of the supplies coming into elevators, especially the ones with rail.
December corn futures did make new contract lows again last week. This time the low was 3.44 1/2 on August 31st. That is 63 cents off the high of 4.17 1/4 on July 11. Interestingly, after making the low we then staged a big bounce, and finished up over 12 cents, at 3.57 1/4.
The reason given to me was profit-taking for the end of the month. By this reasoning, traders that were short, evened up positions by buying to show the profit for the month.
This could be true, or it could be the kind of reason given by someone who has to write market news at 4 p.m. For whatever reason, the low Friday now defines the contract low.
The bounce has held through early trading here Tuesday. We now are trading December corn futures at 3.58 1/4 as we come out of the 8:45 to 9:30 “biscuit break.”
November soybeans futures have been weak, but have not made new lows. The low was on June 23, at 9.07. We then rallied $1.40 to the June 11 high. By Aug. 16, we were back down to 9.21.
As I started writing this on Tuesday morning, Sept. 5, we were up over 5 cents. A few minutes ago, we were up over a dime, and we are now trading 8.58-3/4 November futures.
The December wheat futures have also gained significantly in the last hour. After a low on 4.22 1/2 on Aug. 29, we are trading 4.45 1/2, up six and three quarters of a cent. That is six cents gain in the last hour, so maybe the long weekend effect is picking up steam after all.
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