Strong harvest sends grain markets in a sideways direction

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Soybean dust
The dust rolls during soybean harvest.

The harvest sails on in Ohio, with farmers in the northeast still grinning about progress and yields. Local farmers are admitting to record average yields for beans as they finish harvest currently.

Some are starting to combine corn, with mixed reactions so far. Some tell me they do not expect yields as good as they saw in the soybeans, and that they are starting with some poor corn first in some cases.

It remains to be seen what surprises linger as harvest for many starts into the corn phase. One prominent Trumbull County farmer told me yesterday that the farm average for beans was in the 60s, with individual fields in the high 70s.

Higher yields

This was their best average. They had 200 bpa in a corn field they opened, but did not expect this to be normal. Reports from farther west in Ohio are not consistent with this.

Many leading farmers are seeing sharp losses in yields as North Central Ohio suffered through a long summer dry spell. Weather has been exceptional for the area, with a pause last week for rain, but good progress again recently.

As this is written, we do not have USDA estimates of harvest progress. They were delayed by the Columbus Day (or Indigenous Peoples day, if you are from Cincinnati) holiday, and will be released this Tuesday afternoon.

Harvest update

We are expecting USDA to report the corn harvest at 35 to 38 percent done, the soybean harvest to be 45 to 50 percent done nationally. USDA will be releasing Crop Production and Supply and Demand Reports Oct. 12.

Current thinking is that the corn report will estimate 15.06 billion bushels of corn from a 173.5 bpa yield. Traders think the soybeans will be reported at 4.283 billion bushels from a 51.5 bpa yield.

I was a big deal that some time ago we started thinking bean yields could be above 50 bpa. Now we have even pushed that number up.

Look for this to not be a final number and for corn also to finish above the report from Wednesday. The reason is that the harvest is confirming the estimates, and then some.

Bigger crop

The rule of thumb is that a big crop keeps getting bigger, and expect that the USDA is being more conservative than the final crop will justify. So far it seems that USDA keeps increasing usage to keep up with the crop size.

We need this trend to continue so that prices are supported. Recently prices have been maintaining positive moves, although the perception is that the crop is large.

Part of the reason is the lack of harvest hedge pressure. Farmers are not selling any more grain than they have to.

December corn futures hit the recent high on Oct. 3, at $3.47 3/4. That was the highest price since July 21!

This is not what you expect out of a record harvest. This means the market is prepared for a huge crop without crushing prices.

We are currently trading $3.42 1/2 on Tuesday morning, Oct. 11, so we are hanging in there. The November soybean futures are a little different in that we are seeing lower highs on the cycles.

Current prices

We still have good support, however. We have twice traded up to the $9.75 area, but are currently at $9.55 3/4, up more than one cent on the day so far.

The Chicago wheat is another issue. Currently prices are following corn and beans, but there is not a reason to do this.

Wheat is cheap, and would be expected to stay cheap with the large world-wide supplies. We had a low of $3.86 3/4 the last day of August, but have traded as high as $4.09 1/2 on Oct. 6. This Tuesday morning, we are at $4.04-1/4.

 

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Marlin Clark is an associate of Russell Consulting Group, with a local office in Williamsfield, Ohio. Comments are welcome at 440-363-1803.

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