Marlin: Making market history can be painful

Corn wide

I have been commenting a lot lately on the subject of volatility. That is the rate of change of prices.

That volatility continued the last two weeks with a record one-day move in corn and soybean prices and a huge variability in prices over the last two weeks. Last week corn prices had a 94-cent range. This week, we had a range of 72 cents.

The thing is, one week we were down, and the next we were up. The net result was corn prices only two cents lower.

Soybeans were different. We actually gained 60 cents in the same two weeks, although prices bounced around a lot. We are left with the feeling that soybeans are stronger than corn, but both commodities are trading way below the recent highs. The market fights the calendar now.

Watching the weather

Corn price highs for the year are frequently made in June or early July on weather-related crop stress. That has been especially true this year, as we have seen huge swings in prices depending upon the latest weather forecasts. Traders are focusing on crop conditions and anecdotal reports of rain events.

Soybean price highs can be later than corn highs. It is August that is critical for soybeans, and they can take a lot of stress and still make a crop as pods are filled in August.

So, the temptation is to delay the last of the sales as we watch the weather. In fact, although the soybeans can come roaring back, we have likely seen the corn price high.

Keeping us from being sure about that is the fact that last summer we had a record-making rally very late in the year, as the world of grain changed in August with the wind storm in Iowa that decimated much of the crop there, and export news that fueled surprise in price movement. The Chinese kept buying; the price kept going up.

Crop report

So, where are we now? We got the weekly U.S. Department of Agriculture crop condition report July 12. It showed the nation’s corn crop actually improving slightly. We went from 64% of the crop rated good and excellent to 65%.

Last year, however, we were at 69%, and reports in the low 70’s are what we hope for. Ohio is one of the best states, with 58% good and 21% excellent, for a rating of 79%. We have been blessed with good rain, although corn locally is still short as a reflection of days being too cool, and the fact that most of the corn got planted the third week of May instead of the last week of April.

Lost in the report are the sad ratings from the Dakotas and Minnesota. Minnesota’s corn rating comes in at 42%, the Dakotas at 33% and 31%. Similarly, the soybean ratings show the U.S. the same as last week, at 59%  good and excellent. Ohio, however, is at 75%.

The Dakota soybeans are worse than their corn. North Dakota has a rating of 21%, and South Dakota has a rating of 28%, while 26% of the North Dakota crop is rated poor. The Minnesota soybeans are rated only 45% good and excellent.

We in Ohio do not normally pay much attention to the northern Corn Belt. Yet, in the last few years, the area of corn and especially soybean acres has expanded. The Dakotas and Minnesota now produce a quarter of our crop, and this year the acres had been increased beyond normal. Drought has changed all that.

Looking ahead

Looking at prices, December corn futures have had three large price swings of over a dollar, with each high a little lower. The next 10 days are critical, with heat forecast during much of the pollination of the Midwest.

If we get through that, the drought talk that was so negative in June will have been mostly survived, and we will have a good crop, and remain well off the highs.

December futures had a high of $6.38 May 7, and then a low of $51⁄4 May 26 . That was followed by a high of $6.281⁄4 June 10 and then a low of $5.141⁄4 June 24.

Our last cycle was from $6.111⁄4 July 1 to $5.07 July 9 . We were trading at $5.333⁄4 the morning of July 13.

November soybeans, meanwhile, also had three big cycles, but the biggest was in the middle. The May 12th high was $14.61, followed by a low of $13.253⁄4 May 26 . We traded back to $14.80, the contract high, June 7.

That dropped to $12.701⁄2 June 17, a loss of almost $2.40. The new high came at $14.23 July 1, with a drop to $131⁄2 July 6 . We were currently trading at $13.591⁄2 July 13.


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