Struggling to explain lower grain prices

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grain prices, grain marketing, disaster, Ohio farm,

The news in the grain markets all seems to be bad.

It is past the middle of June and we only have 92% of the corn planted in the U.S. It is too late to plant more. Soybean planting is not done, but we are only at 77%. The weather is still wet and cool. And, yet, prices are down this morning on the futures markets. Go figure.

For the second week in a row in this space, the challenge is explaining what is hard to explain. Well, prices are lower after making new contract highs in corn and beans yesterday (corn) and overnight (soybeans.)

The reason given by the experts is profit taking. That comes to the pen easily, but it is not that simple. Maybe the real reason for lower prices this Tuesday morning is that grain prices do not go up every day, even in extraordinary times.

We are taking a breather this morning, as we absorb the USDA Planting Progress Report and corn condition report out yesterday late in the day.

Crops are in bad shape in the Midwest, and the market is trying to decide just how bad. Ohio actually is at the bottom of the planting list, with just 68% of the acres planted, up from 50% last week. At this point, it must be realized that it is too late to plant corn, and we are not getting the soybeans planted.

Ohio soybean planting progressed from 32% to 46% this week. The historical average for the last five years is 94%. The nation is at 77%, up from 60 the week before. The average there is 93%.

These numbers don’t come as a surprise, though. The market was surprised that the crop condition for corn was not reported to be better. I was reading Monday that we would see a 2% increase in the good and excellent ratings, but they actually stayed the same. Crop condition for the country is at 52% good, 7% excellent for a total of 59. The average is 78%, and more in the excellent category is usually the reason. Ohio condition is rated at 46 plus 7.

Ohio crop condition is not a surprise to drive-by surveyors. Where the crops are planted in good conditions, they have good stands and color. They just are very far behind, what with late planting and cool field conditions. Where the crops are planted in poor conditions, they have poor stands and drowned or unplanted areas. Farmers in those areas are already talking about 60 percent yields.

Then, there are all the acres unplanted. Northwest Ohio, where a preponderance of our crops grow, have many horror stories of farms that have almost nothing planted. Some got a couple of juicy days this week to plant for the first time what they normally plant two months ago.

On June 28, USDA will release updated acreage and grain stocks reports. This will be the official confirmation of the estimate of planted acres. We are expecting corn planting to be down 7 to 8 million acres. USDA has already cut the corn yield estimate by 10 bushels per acre, and there is more to come.

While this planting disaster (not too strong of a word) has been going on, markets have rallied sharply from historically low levels.

December corn futures have gained almost $1.10, and made several new highs in the last few days. May 13 we were at a low of 3.63 3/4, and Monday the 17 we hit 4.73. Currently we are trading 4.61, down seven and a half cents for Tuesday so far.

At the same time, November soybeans gained $1.32 1/2 from that May 13 to the overnight Monday/Tuesday this morning. They have traded below 9.30 this morning, but are now back to 9.40- 1/2, up a penny. That is a gain of more than a nickel in the last few minutes, so this dip may be temporary.

The focus of the market has been on corn, with the soybeans more along for the ride. The focus from here may be more on the soybeans.

Traders are starting to realize that the bean acres will not all be planted. Normally delayed corn leads to more soybean acres. In addition, reality is hitting that the bean yields are going to be sharply reduced by conditions and by late planting.

USDA will not release an actual condition report until probably next week, but expect conditions to be historically sad.

 

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