Market outlook: Great weather, slipping grain prices


Prices continue to slip lower on the Chicago Board of Trade as the traders get the impression that the weather is perfect and that we will have a record crop.

At this point, the traders are right. The crops got planted, although Ohio still has 9 percent to go, 2 percent behind the five-year average. The U.S. has 92 percent of the soybeans planted, but that is 2 percent ahead of normal.

The weather is pushing the crops along, although the temperatures have not been very warm. We have had enough rain, and even too much in some areas, for side-dressing of corn.

So, with the weather seen to be perfect, both old and new corn are down more than 70 cents in a month, and corn is off almost 78 in three weeks.

The soft red wheat is the big loser, down almost 1.64 in six weeks. Friday corn perked up, trading 5 cents higher for most of the day, then closing 3 cents higher.

I had thoughts that the slide might turn around. No, Monday seemed to indicate that the bounce was just the trade getting positions even for the weekend.

A look at markets

Early Monday trading took the Friday gain away, and then some. We lost six cents, and are down one and a half in early Tuesday trading. Now we are back close to the low, and desperately need to stay above that to not do some chart damage.

July futures put the 4.39 1/4 low in on the 11th, and we are now trading just a half-cent above that. Meanwhile, the new crop December futures lost 76 cents off the 5.14 3/4 high of May 9.

We traded 4.38 3/4 on the 12th, and we are back down to 4.41 in early trading this morning (Tuesday).

I will stop talking about July soybean futures since the old beans should be gone. If you have any, dump them now while basis is hot, even after the recent losses in futures.

The November futures are off 77 3/4 cents from the high of 12.79 on May 22 to the low Monday at 12.01 1/4. This morning we are back down to 12.11 3/4.

Wheat collapse

July wheat futures have seen the real collapse. There we went from worrying about the droughty Plains crop to worrying about the increasing world-wide supply.

July Chicago wheat futures are off 1.63 3/4 from the May 6 high of 7.44 to the low Monday of 5.80 1/4. Currently we are trading just above the low, at 5.82 1/2.

No longer nervous

In the West, the corn basis is firm, as supplies are decreasing. The tight supply comes as farmers are holding corn, hoping to get some of this break back. The elevators are keeping sold up, as the cash traders do not want to risk selling into the inverse.

That is, September futures have been a nickel cheaper than the July.

If we switch to dry weather and fire up a crop scare, the farmers will get some of the price break back. If we continue with good weather, prices will remain low or even trend lower after a safe pollination.

Nothing hurts a price like smug traders who see no supply problems.

So, the mood has changed. A month ago prices were nervously creeping higher on the late planting fear. The planting got done, the sun is shining, we are getting regular rain, and crops look good.

Condition, according to Uncle Sugar, is slightly higher. This Monday the corn crop was reported at 76 percent good and excellent, up 1 percent from last week, and 9 percent better than last year.

It is hard to argue that the corn does not look good.

At the same time, corn exports are progressing as expected, with a no-surprise 43.4 million bushels exported last week.

Soybean products are also struggling to maintain prices. The bean meal broke support on the July contract yesterday.

The meal is being hurt by lower DDG prices. They, in turn, have been hurt by the “frankenfood” problems we talked about last week, with China refusing some GMO’s.


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