Another day, another few cents lower. What more can you expect from the Miracle Max market?
You remember Miracle Max. Billy Crystal brought him alive in the movie Princess Bride. If you didn’t see the movie, you have missed a classic, and one that it is hard to describe. It was a spoof of Dark Ages England, with castles and knights mixed up with Quixotic characters trying to overthrow the King.
In the critical scene, our hero is captured and tortured to near death in a dungeon by a mad scientist with a fictional device. As the machine runs, it literally sucks the life out of poor Wesley. Friends get his inert body to the cottage of Miracle Max where, after Max listens carefully to his heart, he is declared to be “only mostly dead.”
That is where we are on the Chicago Board of Trade these days.
I turn on the screen this (Tuesday) morning to find that corn is down 3 cents a bushel, soybeans only one. That is good news only because it has been mostly worse the last month.
Yesterday as I traveled across Ohio to a meeting in Ashland, I heard the news on WKBN Youngstown. At the end of the report was the notice that Ohio farmers were in trouble because, even though the crops were better than last year, the prices were only half as high.
I laughed to myself that the report was simplistic, in that it understated the problem in corn where the price is actually less than half, and it exaggerated the soybean problem where we have declined badly, but are still way over half of last-year’s prices.
Front page news
Then, I made a bigger realization. What on earth is happening when a local news station bothers with farm news? Things have gotten critical when the news director of a city station even notices.
That brought to mind the old rule of market predictions. That is, when the farm news hits the front page of The Wall Street Journal, the trend is going to change. The idea is that the mainstream press, even if it is the business press, reacts so slowly to farm trends that, for example, by the time they hit page one above the fold with a story on a nationwide drought raising prices, the prices have surely topped out.
So, too, when WKBN reports on the pathetic corn prices (without being specific, because most listeners would have no frame of reference), chances are that the corn market is really “only mostly dead.”
So, corn prices declined again this morning, this time to December futures of 3.26 1/2. This translates to a local new crop price around 2.75.
That would be exciting if this were 1965, potash still cost $62 per ton and a bag of seed corn cost $85. I remember when the news crop prices were getting close to $3 and no one wanted to think about selling corn until it got back to $4. Now we are not anywhere near $3!
After what seemed like a long and stable time of soybean prices in the double digits, and often well above $15, we are looking at single digits, and local cash prices below $9.
Wheat has lost nearly $3 since May. We have traveled though the Valley of Despond this summer, which has actually been the valley of indecision. Surely the prices can’t keep getting lower! (Yes they can, and don’t call me Shirley! Just one more movie reference.)
Hope this is the low
Yesterday I commented to Amanda in the home office that, with prices sharply lower again, it looked like we were headed to a pre-harvest harvest low.
On the one hand, I hope that is true. If we get into harvest and see that the big crop just kept getting bigger, the worst is yet to come.
On the other hand, harvest is already getting into the market. The corn harvest is slow to start, but USDA reports that it is 7 percent complete. Normal is 15, but corn is rolling in states to the south.
Soybeans have started coming off, even in Ohio.
Desperation, “we are out of beans” basis bids of $3.50 over November soybean futures at the processors have faded to minor premiums before the end of September. This week looks good for filling one bid each in Bellevue, Fostoria, Marion, and Delphos.
Those soybeans are only 3 percent harvested compared to the average of 8 percent, but as I said, some are off in Ohio so the pressure is also off.
Now we have the race to find out what the average crop is. If we have over-estimated the size, prices will stabilize. If the huge crop is really rolling in, the worst is still ahead of us as the harvest pressure on futures of elevators hedging grain takes place.
Don’t forget Brazil
Adding to the pressure on the beans is the news that Brazil is planting beans at a faster pace than normal. In addition, deflation in their currency makes soybean prices higher. That provides incentive to plant more acres. Some estimates project five percent more acres there this year.
Yippee! Just what we needed (not).
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