Market Monitor: Harvest pressure and strange dreams

When a grain trader talks about harvest pressure, he is referring to the effect on the futures markets on the Chicago Board of Trade brought about by farmers taking grain to town and elevators selling futures to hedge it. The effect is normally to force down the price of futures since there is more need to sell than to buy.

I don’t expect that to happen much this year.

There is more farmer storage and the prices have already declined from forces other than selling pressure. Producers that passed on selling at higher numbers or could not find a buyer with any hedge money left to buy any cash grain, are not likely to take the current prices if they can resist needing the cash flow.

So, the grain will not go to town until the bins are full, and the grain in the elevator is likely to be storage or delayed pricing. The elevator will have to hedge the DP, because that is a change of ownership. Of course the elevators may be tempted to speculate long this year and not sell themselves.

Horrors

Grain prices have been horrible the last three weeks. Any news we had was bad for prices.

The USDA Grain Stocks Report said there was more in storage than we thought. Then, last week, USDA told us the yields were better than expected in the last report. That was contrary to what I was expecting, and it was negative to prices, also.

I had said last week that the market could turn when the early disappointing bean and corn yields were realized. I am still hearing that talk, but it does not agree with USDA.

Either the poor yields are more localized in northwest Ohio, or USDA is wrong. Don’t bet against USDA.

Meltdown

The big influence on prices the last three weeks had been the financial meltdown. It is hard to explain why stock prices take grain prices lower, especially since I don’t understand a lot of it.

Still, watching the prices has been a gut-wretching experience.

A month ago, I told you the market was fishing for a bottom, and it turned out the worm was just stuck on a shelf. We have fallen off that shelf into the Mariana Trench.

Looking at the numbers, corn has lost just about half of its value since the late June high at 7.99 3/4. (If I don’t put a dollar sign in front of it, it is just a number and is not so painful.)

The recent low was Monday at $3.98 1/4 December futures — $1.75 of that was in the last three weeks, during the financial crisis. November soybean futures have lost more than $7.50 since the top at $16.36 3/4 seen July 3. Kind of keeps that myth of a high on July Fourth alive, doesn’t it! About $4.25 of the loss has been in the last three weeks.

December wheat futures made their low Friday at $5.58. That is a $2 loss in the last three weeks, and $4 off the value since the end of August. It is also an amazing $7.26 1/4 off the all-time high made in March.

Crystal ball

Predicting where we go from here is the worst kind of crap shoot. Easy to roll snake eyes this kind of year.

My gut is that the lows have been made on financial news that has forced them below true value. That would make you think they would rebound and get much of the last three weeks’ losses back.

Reality tells me it is harder to go up than to go down any time, and it is especially hard at harvest. Add to that the necessity for speculators to find some money to buy back in, and we have a struggle ahead of us.

Nightmares

For me, weird dreams go along with a market like this. Must be the marketing stress getting unwound with my eyes closed.

Last night I was trying to get a single-axle 1955 Ford straight truck of ear corn unloaded at the local elevator but there was a bottle neck on the scales. A semi driver was trying to replace the scope of his dump while parked on the scales.

What made the dream fun was the straight truck was one I actually used to deliver corn every day to Jefferson when I was a kid. Missing from the dream was the cable lift you backed between to reach the dump, and the roof that was so low that I could only raise the dump high enough to get half the load off by gravity.

That was so much better than the feed mill at Wick where you raised the dump about 10 degrees, then wheeled the load off the back with a two-wheeled cart. I used to go there before I even had a driver’s license.

I’m getting so old I don’t even dream about the ’49 Ford with the two-speed shifter mounted on the dash.