Price action on the Chicago Board of Trade continues to defy the calendar. As the soybean harvest nears completion and the corn harvest is in full swing, prices have continued to be firm in soybeans and to rally in corn. These higher prices come even as prices normally decline going into and through the harvest.
Corn high. We recently made a new contract high in corn, at $4.09 Oct. 16. This not only smashed through the psychological barrier of $4, but it also took out the January/December futures high of $4.043⁄4 by almost a nickel.
It is true, the market then retreated, leaving some traders talking about the end of the rally. So far it seems that the retracement to the $4.02 close Oct. 16 was simply due to harvest pressure on a Friday, when traders did not want to be long over the weekend and when elevators were hedging harvest grain that farmers were pricing. The new high represented a gain of 89 cents since early August.
The December corn gained over three cents to close at $4.0521⁄4 Oct. 19. This was a sign that we might have more upside. In early trading Oct. 20 as this was being written, we were up fractionally to $4.053⁄4, but have been as high as $4.071⁄2, so we are hanging in there near the new high.
Soybeans, meanwhile, have held on to most of the gains made since early August. November futures have gained over $2 since Aug. 10. The high was $10.793⁄4 Oct. 9. We were still trading at $10.613⁄4 Oct. 20, and that is up 71⁄2 cents for the day so far.
The firm soybean prices come even as the U.S. harvest is now reported by the U.S. Department of Agriculture (USDA) to be 75% finished as of Oct. 18. A lot of the harvest has gone to town, and farmers are pricing at these levels, but the resulting hedge pressure on prices has been mostly shrugged off.
Helping firm prices is the report from Brazil that farmers are still waiting for rain to plant crops. The planting is at 6%, but they are normally 19% at this time. The realization of how many soybeans have been sold to China is a huge factor in this market, and traders are putting exports in the pricing even if USDA does not show them on the balance sheet until shipment.
Let’s look at harvest progress numbers. The USDA shows Ohio now 24% harvested for corn. This is up 9% in a week, but well behind the five-year average of 37%.
In our part of Ohio, the harvest is just starting. I talked to a farmer yesterday who had combined 750 acres, but he is a rarity. Most of the corn is just now mature enough to run and is still drying down.
Farther west, some areas are done with harvest. One farmer from Nebraska I talked to yesterday said when he finished, he had corn at 11.6% moisture!
Remember, much of the crop in the heart of the Midwest was planted record early in response to the delayed planting of the previous year. The USDA is reporting the nation is 60% harvested, up from 41% last week, and well ahead of the 43% average.
The USDA has reported the nation’s soybean crop as 75% harvested. That is a gain of 14% in a week, and is well ahead of the average of 58%. Ohio, meanwhile, is at 65%, slightly ahead of the 63% average. So, we are having a big rally at an unusual time.
What we are not seeing is a wild market that is a total surprise fundamentally. The surprise is just the timing. Still to be known is the volume of the crops. Some farmers I talk to say they are disappointed with yields, but some say they have crops that are 10% above their APH. If the crop size is reduced any, we will see more market action. Stay tuned.
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