Markets on the Chicago Board of Trade Oct. 12 gave us new highs at or near big psychological numbers, but perceived harvest progress and prospects of continued good weather reversed prices.
December corn futures made a new high just fractions under the magic $4, but then reversed to close down four and three-quarters of a cent at $3.901⁄4. The high was $3.991⁄4.
The November soybean futures made a daily high of $10.731⁄2, but reversed to close down a terrible 25 cents, at $10.401⁄2. This was not the contract high, which was actually made the previous Friday, Oct. 9, at $10.793⁄4.
December Chicago wheat futures closed at $5.99, but was trading at $6 Oct. 13, and traded a new high of $6.193⁄4 Oct. 8. It is a huge deal to see corn at $4, beans at $11, and wheat at $6.
We were very close on corn, within one day’s trading on beans, and over on wheat. “Were” is the operative word, except on wheat.
Wheat prices are being supported on news of problems worldwide for the crop. The Black Sea region is dry, as are our Southern Plains. Corn and soybean prices reversed as the market reacted to assumptions of great harvest progress. These will be confirmed or not, a day late, with the Oct. 13 U.S. Department of Agriculture crop progress report. The report was delayed by the Columbus Day/Indigenous People’s Day, depending upon how PC you are.
Traders assumptions of the harvest led to a crash in soybean prices, with carryover to the corn markets. Current forecasts show very little rain, although it rained at my house last night with a forecast of a 10%chance, so we need to remember that forecasts involve theory to be confirmed later.
The bump in harvest leads to wider basis, pressure on futures from elevator hedging, and a typical seasonal market for a change. Add to the mix a high level of farmer pricing because of the elevated prices of late, and you have a harvest break.
If the USDA confirms the harvest progress, the break is sustained, although early trading Oct. 13 had the corn up a penny and beans up six cents, mostly as a rebound. Grain markets seemed to trade in spite of the USDA Oct. 9 reports, which were termed negative to the market.
Analysts anticipated a couple of bpa break in corn estimates and a small soybean adjustment. They got neither, with just a tenth of a bushel per acre corn adjustment, and an unchanged soybean estimate.
The USDA did lower corn acreage by a million acres. When all the adjusting of other categories was done, the corn ending stocks were lowered to 2.167 billion bushels, from 2.5 billion. With that number, I am not sure why the report was considered negative unless we just look at production.
The argument is going on that the USDA balance sheet is way off because of their methodology. They do not like to show exports based on contracts but based on actual reported shipments. This creates a problem when China is known to have already contracted 20 MMT of corn for the year, but USDA only shows 7 MMT expected for the year.
Obviously, this changes, as the market assumes the Chinese really want our corn, although they have not bought much in the past. It is argued that the traders actually are using a carryout of 1.8 billion bushels, based on the way prices are acting. Of course, this means that USDA can change the balance sheet dramatically and it will “already be in the market.”
USDA soybean numbers were more bullish, except for production. Planted acres were reduced by 700,000, and carry-in stocks were reduced by the September grain stocks report by 52 million bushels. The result was a carryout for the end of 2021 reduced from 460 million bushels to 290 million. This is the big reason for the run up to new highs.
Soybeans are also being hyped by dry weather in South America. The norm there is dry weather before planting. Farmers wait for rain to plant, worried about poor emergence. The dry continues, so Matto Grasso, for example, only has planted 3.2% of the crop, compared to a normal near 19%. This story will continue.
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