No real market surprises as fall arrives

Fall harvest, 2018
Fall harvest, 2018.

It has been summer for a long time, it seems. Everything is green. We wear sweaters only because it is too cool inside in the air conditioning. (Sorry, maybe that is just us geezers.) It is the time for cookouts, swimming and driving with the sunroof open.

Then, 10 days ago, the field of soybeans across the road suddenly had a few brown leaves. A few miles away, I saw another field that was browning. Now, I drive around and realize that even late beans are starting to turn, and the corn is browning off.

A field of Denman corn along state Route 11 has been chopped for silage. The woods behind my office now has streaks of yellow, and some trees are all yellow.

Maybe fall has snuck up on me. It should not surprise me. I have watched this happen for decades, but I am not outside every day, watching. I go out late in the day when the colors are muted. The days when I was working in nature every day are gone.

Harvest lows

It should also not surprise me that yesterday I was hearing talk of the harvest lows being made last week. This is never a sure thing, until fall is over, but December corn futures dipped below $5 briefly Sept. 10.

We had been told that $5 was pretty good support, but we touched $4.971⁄2, and then bounced to a close of $5.171⁄2. That bounce had the feel of good support even though we were as low as $5.071⁄2 Sept. 13. The morning of Sept. 14 we were at $5.173⁄4.

The November soybean futures acted similarly. We put in the Chicago futures low at $12.623⁄4 Sept. 10, but closed at $12.861⁄2. We had a dip to $12.77 Sept. 13, but were trading $12.933⁄4 the morning of Sept. 14.

Harvest has started in some areas, although much of the Midwest is talking about combines running in another week.

Here in northeast Ohio, I look for early harvest of soybeans the last week of September, and maybe some corn run by Oct. 10. Hot, dry weather would advance those dates, but we need to remember that most of our crops were planted in the middle of May, not late April. Also, we have not had the kind of heat that drives early maturity.

No surprises

The anticipated market driver last week was the U.S. Department of Agriculture report. It was termed “bearish,” but that was only because of expectations of lower corn yields. In fact, there were no surprises.

Planted acres were expected to rise, and they did, but not as much as predicted. We were looking for 93.7 million acres based on actual ASCS reporting, normally not in the September report. We got 93.3 million. The yield ended up being raised to 176.3 bpa.

Some expected that, but some thought we would come in as low as 174. So, we got a reaction down Sept. 10, but it did not last the day. By the end of Sept. 10, the market cared more that we are now looking at a carryout projection for the end of August 2022 of only 1.4 billion bushels.

We have talked about a carryout as low as 1.2, but this is still low, and there are reasons it could get lower. Since this is close to pipeline supply, we still think prices have to stay firm and firm up after harvest.

USDA similarly only jiggled the numbers in the soybean balance sheet a little. Thinking was that the yield would be 50 bpa, but USDA now says it will be 50.6. That contributed to a higher carryout, now estimated at 185 million bushels.

Pipeline supply is in there somewhere, maybe as low as 170 million bushels. We finished this year at 175, which is the reason for our high prices this summer.

Again, there are reasons to believe this carryout will end up lower if some observers’ thoughts of increased exports come true.

Chicago wheat markets lost 38 cents last week. Even though the U.S. has supply problems, especially in the spring crop, the world focused last week on the French market, which lost $50 per ton over the last three weeks.

Adding up all our wheat classes we get a balance sheet that shows the tightest supply in the last 10 years. When we were that tight, we had prices of $8 to $11.

That would indicate that the market will continue to fight over which dog to hunt. Do we trade world supply or U.S. supply?


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