Grain markets in middle of ugly, inevitable transition into the new crop

Farm and Dairy file photo

When I was a young teen, my parents took me to Smelko’s, a water park just south of Cortland. The outing was sponsored by my parents’ Farm Bureau council, so it included other young teens.

The most memorable feature of the water park, memorable enough that I can still remember exactly where it was situated, was a large water slide. It seemed to be 50 feet tall, but it was probably half that. Not one was using it until Gary Fetters and I egged each other into going down. You know how that works. Neither of us would have done it if we didn’t have to prove to the other we weren’t scared, when, of course we both were.

The big accomplishments and the biggest mistakes in history generally come about this way. Call it an early testosterone moment for Gary and me.

The secret of thrill rides is the sensation of danger. One has to be convinced that he is taking his life in his hands to get a good thrill. Of course, in fact, there is no danger, or the ride operator could not survive.

I understood at an early age that there could be no real danger on the water slide, or it would not be there. So, off I went.

Remembering, I think the climb up the ladder was the real scare, and probably the only real danger. Off I went, accelerating past what was surely safe, until I came to a hump in the slide. My body left the slide completely while I was still only half-way down. There was the total fear that I would fall the rest of the way, but then I slammed back down on the slide for the rest of the fall into the water.

The 17th time down was not nearly so scary.

Corn slide

I remember this on Tuesday morning as I think of the current slide of corn prices into harvest.

It is scary, because the fear of falling is programmed into us at birth, and the last few months have not been fun.

As corn prices have gone down, it has felt at times like we have left the slide completely and will fall to our financial deaths. A few days ago we hit a bump, and it felt like we were flying.

The dry weather-fueled rally in soybeans dragged corn along, and there was the temptation to believe that corn prices were recovering. Now we are back on the slide, and still going lower.

I should be scared, but this is more than 17 times for me now — not my first water slide in this business!

New crop transition

Corn prices are well into the last phase of the ugly and inevitable transition into new crop.

We can now stop thinking about what gave us high prices last spring and concentrate on what we have ahead of us now.

The market that gave us $7.25 corn last spring is now struggling to give us $4 corn for new crop. That was then and this is now.

Then we had the fear that we did not have enough corn, but now we have the fear of plenty.

Then we had the fear that the weather was limiting the new crop, a fear that was realized in many areas. Now we have a market mostly satisfied that the crop is made.

Then we had the ethanol plants hanging their tongues out, hungry for corn. Now we have a mature ethanol market that has just gotten through a period of high supplies of ethanol and high cost of corn. They have discovered that they have excess capacity to produce E10, and E15 is not taking off.

Add to the idea of a lower demand for corn and a good supply the reality of really odd futures relationships all year.

No ‘normal.’

This was the year the farmers learned was inverses were and the elevator operators learned what a nightmare it was to try to make money against the inverses.

The March futures were lower than the December. The May futures were lower than the March. The July were lower than the May. The September were lower than the July.

All year, we cash grain buyers begged farmers to sell corn now, before the prices dropped. Mostly farmers responded, although early on they were suspicious we were just pushing them to sell too soon.

The normal pattern of corn being worth more later in summer was blown away. The best sales were in February, and we played catch-up all year.

It is lonely in the grain offices today. The phones don’t ring, unless it is from a processor needing one more train or a few trucks to get him through.

The farmers are looking at futures prices on the Internet and are not calling in. It is hard to get excited about $4-something corn when it was worth so much more last year, and when it cost more than that to grow it.

New crop is here

The reality is that new crop is here. Corn is coming from Virginia into Clearfield, Pa. An Ohio ethanol plant bought a train of corn from the South last week.

Everyone is stretching to make it to the new crop, and the new crop may be late because of cool weather.

Today it is supposed to get into the high 80s. That’s nice, and it will help, but we needed this for two months when we were 72 degrees. Comfortable for man, but a small step for the corn fields.

We are down to the last hope for corn. That is, that the crop size is overestimated, so that we may have a bullish reaction into October. This could give us a new-crop high at harvest, when the reality of a smaller crop is proven.

More likely, USDA is right, and prices continue the slide.

Never bet against the government numbers. Argue against them, be prepared for surprises in them, but believe them while they are there.


Soybeans are another matter. In round numbers, we gained $2.50 in November futures in August, then lost 55 cents the first few days of September.

The gains were made on the reality of dry weather in the west at a critical time for beans to be filling. The break came as all breaks came, when the market ran out of bullish enthusiasm.

We are now mostly waiting for the reality of harvest. Soon we know what we have. The soybean harvest is started in the southern Corn Belt. As far north as Central Ohio there are farmers with short-season beans getting started.

Even in the frozen north of the Corn Belt, Ashtabula County, Ohio (not actually on most modern maps of the Corn Belt, which ends east of Interstate 71), beans are starting to turn.

So, soon we will know about our local beans, and soon we will know about western beans, which are what run the markets. Soybean prices are now high, and sales should be made.

Corn may be a different matter. We are at an ugly price level, but one that may be better than later. The wishful thinker in me wants to hold off.

At the same time, even though I think sales should be made out of discipline, I cannot bring myself to lean on anyone to sell. I don’t want the responsibility at these prices.


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