Harvest hopes now dominate market

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harvest

It is hard to think about harvest when it is still August in Northeast Ohio, but harvest thinking is dominating grain markets on the Chicago Board of Trade already. Harvest time is here — if you look at the entire country and not your back 40.

Harvest is in full swing in Texas and starting in the Delta, those areas of seven states close to the lower Mississippi. Harvest is two weeks away in southern Illinois. Corn and beans are drying out as far north as Minnesota, although part of that is from the acceleration of dry weather.

Trends

The grain charts show this trend toward harvest. In a big crop year, the low tends to come at harvest. In fact, even though we have had a very volatile summer, the long-term trends in corn and soybeans are lower.

That is, if you look at a daily chart, the high for December corn futures was $6.38 in early May. Since then, we have had five cycles, with the last high at only $5.941⁄4 Aug. 21. We were trading at $5.42, up four cents the morning of Aug. 24.

Similarly, November soybean futures have had declining highs. We started with the contract high in early June at $14.80. Since then, we have had four cycles, with the last high Aug. 17 at $13.793⁄4, almost a neat $1 from the contract high. We were trading at $13.061⁄2, up almost 14 cents, the morning of Aug. 24.

Time

The secret for this long-term decline is time. In spring and early summer, we have a long time to go to harvest, so every wind of change blows briskly through the markets. Time means time for fear of problems in the crop.

As the days go on, there is more confidence in the prospective size of the crops and less time for bad things to happen. The only exceptions in my lifetime come from so-called “black swan” events such as the Iowa derecho of last year or the blow-up at Chernobyl.

Now, with the growing season at an end in the South and coming soon in the Midwest, we are more comfortable with our expectations.

Once again, we have analysts talking about trend line yields instead of the drought in the Northwest Corn Belt. The drought is still there, but the last 10 days has seen rain over some of the most parched soils.

In addition, we have seen the conclusions of major crop tours which confirm record crops in the Eastern Corn Belt that will make up for losses in Minnesota and the Dakotas.

Local crops

Locally, I think the excessive rains of July permanently hurt the soybeans so that we will come nowhere near the record yields of last year. The beans were yellow from water, but have grown out of that. They are, however, very “up and down” depending upon how wet roots were in the lower areas.

The corn is hard to judge. There are yellow areas where perhaps the rains leached out the nitrogen. Yet, roadside surveys make them look as good as last year.

We have been a little cool for corn, but we have had sunshine between the rain showers, and we have certainly not lacked for rain.

Farmers that have watched the high prices of the summer will be reluctant to sell anything at harvest. Sometimes we will see a harvest low price, and that may be coming even now, ahead of harvest.

Projections

When the crop is in the bin, we will go back to counting bushels and projecting next year’s carryout. There is every reason to believe that the carryout for corn and soybeans will be as tight next year as it is this year.

Last week, I wrote about pipeline supplies. You will continue to hear about that concept. Soon, we will know if the crops are as big as projected. Immediately after that, we will start to trade from the view of supply, which appears to be large enough to use our crop up again.

As almost an afterthought to the finishing spring wheat harvest, wheat futures on all three exchanges were sharply lower last week. The Chicago futures were down 48 cents.

The hype is going out of the market as the bushels are counted. The Russians are having a reduced crop, but others made up for them. The exception is the spring wheat, which suffered in the drought and started with smaller acres.

The talk I hear is anecdotal, with a common 30- 35 bpa for spring wheat where 60 is normal.

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