Harvest is finished and finishing over the Midwest. In the process, prices have firmed up significantly in corn and soybeans, and the wheat market has continued to rally to near-record highs. Lost in the enthusiasm for the week is the fact that we still have long-term downtrends in place in corn and soybeans.
We put in harvest lows ahead of harvest and in early harvest, depending upon location, but the highest prices were actually in July. Since then, our highs have had a strong pattern of getting lower.
Look at December corn futures, which will be our lead trading month for another few days. We were trading at $5.74 the morning of Nov. 16, down a couple. The contract high was made July 1, at $6.111⁄4.
Since then we have had highs at $5.941⁄4, $5.86, $5.82, and $5.063⁄4. The low was put in Sept. 10 at $4.971⁄2.
Similarly, January soybean futures had a high of $14.25 July 1, and then highs of $14.201⁄4, $13.831⁄4, $13.40, $13.17, $13.041⁄4, and $12.733⁄4. The low was Oct. 8 at $12.733⁄4. Currently, we have rebounded and were at $12.551⁄4 the morning of Nov. 16.
Different pattern in wheat
Our Chicago soft red winter wheat futures have had a different pattern. As we have observed in previous columns, the prices there have been driven by the supply shortage in the hard red spring class of wheat traded in Minneapolis.
We made a new contract high in Chicago December futures Nov. 15, at $8.291⁄2. Remember when $5 seemed like a high price? The spring wheat, meanwhile, made a contract high of $10.861⁄2 Nov. 2.
Corn and soybeans normal
It must be said that the corn and soybean price patterns are quite normal. Up until July 1, we had fear in the markets driven by historically dry weather conditions in the northwest part of the Corn Belt and scattered dry areas elsewhere.
Even later, the fears continued, but the futures market anticipates the worst, and the worst was in the market by the first of July, both in corn and soybeans.
Farmers use the traditional date of the high as the Fourth of July, but it normally is a week or two before that, and then confirmed in early July. After fearing the worst for the market, prices slipped as conditions were sad, but not terrible for the rest of the year. In fact, corn and soybean yields have exceeded expectations, even in the dry areas.
We saw a serious dip just before last week’s U.S. Department of Agriculture reports, followed by recovery this week as negative ideas going into that report were mostly not confirmed.
December corn futures gained 24-1⁄2 cents to the close last week. January soybeans gained almost 39 cents. This came as USDA raised the current corn yield estimate by a half a bushel. That is not much, but it adds 43 million bushels to our supply.
However, USDA now estimates the ethanol grind to be higher by 50 million bushels, so the net result in the balance sheet was a lower carryout of 1.493 billion bushels. Remember, pipeline supply is somewhere just over one billion, so we are starting to get a little comfortable.
The market actually rallied on this bearish news because it is now known, and it could have been worse. It is worth noting that our genetics are getting so good that we can have horrible weather over large areas and still have record corn yields.
The yields were helped by huge yields in the Eastern Corn Belt. There, the yields were not as good as thought in early summer, but were suburb, especially in corn. Locally, our bean yields were hurt by excessive moisture and were not as good as last year.
The USDA report did surprise the market by lowering soybean yields by 0.3 bpa. The market was looking for a raise of at least that much. This contributed to a carryout increase of 20 million bushels.
Iowa’s yields were cut by 1.6%, which might have had a disproportionate effect of prices, which then rallied. As mentioned, the wheat markets continue to rally, based mostly on the severe spring wheat shortage. The wheat market could continue higher, or could take a breather.
Notice that the spring market current high is behind us, so the worst fear could already be in the market. There is little to support this level of Chicago price if the spring wheat rally does not continue.
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