Market’s odd harvest rally continues

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A combine harvesting corn.

The odd harvest rally has continued this week. Corn futures have made modest gains for new highs. Soybean futures made a new high Oct. 27 after retracing a few cents last week.

Wheat futures, however, have retreated from the high of Oct. 20 on rain in the dry Southern Plains and Black Sea regions. So, positive price moves at the time that harvest pressure normally hurts prices.

Blame this one on the continued feeling in Chicago that the crop estimate and the carryout number published by U.S. Department of Agriculture are a little low. Add in rain patterns across the Midwest that have delayed harvest progress from expectations, even though harvest is ahead of normal in most places.

Ignoring COVID

The market seems to be ignoring the negative factor of renewed talk of the apparently resurging COVID-19 pandemic. Yes, 40 states now are seeing increased cases of the disease. Yes, some of the surge is a statistical anomaly brought about by increased testing. Still, hospitals are filling up, but the market has heard it all, and the news is not bumping the needle of current prices lower right now.

The American corn crop was reported by USDA to be at 72% harvested. This is up 12% for the week, and well ahead of the average 56%. Still, the market expected more, and this helped push prices to a new December futures contract high of $4.22 Oct. 27. This is now an amazing $1.02 below the triple bottom of $3.20 in early August.

Ohio crops

The Ohio corn crop is reported to be only 32% harvested, a gain of only eight points in the week. Drizzle, with a couple of local hard rains, has limited the corn harvest in our state. Locally, harvest is just nicely started, with most farmers still chasing the odd soybean field into the bin.

Ohio is close to the average on the soybean harvest — 73% is off, versus the average 78%. The U.S. harvest actually normally lags ours. The average for the country is 73% at this time, but 83% was actually off as of Oct. 25. Slower than expected harvest progress may be spiking the soybean prices.

On Oct. 26, we saw a new high of $10.893⁄4, and we were trading just a half-cent below that Oct. 27. Soybeans have now posted a gain of $2.341⁄2 since the low Aug. 10. Farmers are selling soybeans at these prices, but the market is still proving pent-up demand by inverting the futures prices.

November futures are currently trading $10.861⁄2, but January futures are $10.82, and it gets cheaper from there. The spread from November to July futures is now minus 30 cents. This is a nightmare for elevators, which are forced to sell when they would like to carry to pay for facilities. It is a market telling farmers to sell now, unless they are betting for still higher prices.

Demand market

The soybean market looks like a short-crop market, with demand at harvest. In fact, it is just a demand market. A short-crop harvest makes a high at harvest, and then gets cheaper even as farmers hold beans for higher prices. It remains to be seen how this market progresses.

Prices have been helped by the dryness in South America, which has delayed planting. Rain in Brazil has pushed planting to near 30%, still well off the normal pace. If rain continues, the beans will be planted. They will just not compete with our beans as soon as expected, which is normally late January.

Once the South American beans are ready, they will be the world market, priced well below ours. So, a tricky and tempting market. Significantly higher prices are telling farmers to sell, but advisors caution that there could be higher prices.

As usual, the risk is all with the farmer.

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