Grain markets: There’s no romance when flirting with the high


Traders on the Chicago Board of Trade made a run at the all-time corn high price early Tuesday morning (July 17). By the time most offices opened, however, the excitement was over.

In the grain romance of 2012, they have rounded third base, but have not been able to make it home.

The $8 barrier

The big barrier to trade for corn is the all-time high just below $8 made four years ago. Just below means one tick below, at 7.9975!

Overnight we were as high as 7.96 1/2 September futures, then dropped dramatically to be actually at a loss for the day. Monday the high was 7.80 1/4 on the September.

We are currently at 7.82 1/2, up 5-3/4 for the day. A few hours ago we had dropped to 7.67, nearly 30 cents off the high.

Market mover

So, what happened? Traders had sell orders in just below the all-time high. When they triggered, they sent ripples through the market that dropped prices. As trading continued this morning, some reason came back in the market and we are slightly higher.

Similar action is making waves in soybean markets. There, we technically made an all-time high back on July 9 in the July futures. The trade was at 16.6975. This was kind of phony, because that contract was in delivery, so no cash grain was being hedged against it.

The “real” high was this morning, at 16.4775 August futures. We are back to 16.36 Tuesday at 10 a.m. as this is written.

Most farmers are watching the November futures. There we saw a high in the wee hours Tuesday at 16.07. We are now trading 15.94, up 3 1/2. A few minutes ago we were off a nickel.

So, traders are afraid of the record highs, and selling off when we get near them. Meanwhile, the fundamentals keep looking ugly.

Crop report

The USDA Crop Condition Report out Monday afternoon was grim, with large reductions in crop conditions. The rain has not come, and is now nearly two weeks behind the break we got with rain in 1988, our bellwether year. This, when the crop progress is earlier!

How bad is it? Things are so bad that analysts are now talking about 1956 instead of 1988. The drought has officially reached a wider area than in 1956.

I don’t remember much about 1956 except having to stand in the corner in first grade for the crime of kissing Beth Piper. She told on me.

I remember Dad talking about 1947 when he said he cut the hay, then he couldn’t see it to rake it because it was so thin on the ground.

USDA says the nation’s corn crop is now 31 percent good and excellent. That is down from 40 percent in one week. Last year at this time, we were at 66 percent of the crop good or excellent.

Ohio is now one of the worst states, with 19 percent rated good or excellent. Sadly, only 1 percent of that is “excellent.”

Agronomists at Town and Country’s plot night rated Illinois and Indiana at 50 percent of a crop. They thought Ohio was at the critical point (remember, this will be a week old when you read it). They could see us at 55 percent, or with timely rains we could still have a crop in the 90’s percent of normal.

Most of us saw just enough rain over the weekend to be frustrated. A nice shower at my house Sunday afternoon was exciting until is stopped after five minutes. That and some other smaller showers left me with 0.2 inches of rain.

Five miles away one farmer reported nearly an inch and a half. I suspect most got rain more like mine.

There is no doubt the crops are in trouble. Farmer pricing targets have dried up with the fields.

The demand side of the market is also in trouble, which is now causing traders to pause.

High prices cause ripple effects. Ethanol plants are suffering, and closing. Some will have trouble reopening because prices will still be high. Livestock numbers will decline. The lead article on DTN this morning was about “Demand Destruction.”

In 1947, Dad scraped up some money and loaded the three kids he had then in the car and headed west. He had relatives in the Pacific Northwest and in Arizona. His brother stayed to milk the cows. A month later he was back home, to find out there was now a hay crop and he was still in business.

If we could go away for a month and come back, we would likely find decent crops. That is still my hope, and what I am planning for.


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