Surprise fundamentals crash grain market


Last week, I wrote about the long slide south in grain futures on the Chicago Board of Trade. I speculated about the reasons for prices going down. This week, the slide continued with a vengeance, and there was no doubt about the reason.

USDA released new numbers for planted acres and grain stocks Thursday, June 30, before the open, and the market was shocked into panic selling.

Report a shocker

For weeks, the thinking has all been about low grain stocks and running out of corn and beans before new crop. The late planting was acerbating the fear, with the thought that we might need a couple of more weeks out of the old crop supply.

Now comes Uncle Sugar with planted acres for corn higher than before we had planting problems and grain stocks for all three major commodities higher than any trade guesses!

The new numbers stirred the market into more sharp losses, as traders are examining the numbers and arguing against them.

The trouble with fundamental news coming from the government is that the market is forced to trade them as fact. Never mind that Ohio traders do not believe the acres said to be planted in Ohio. They are right until they are proven wrong.

Huge numbers

USDA now says that we actually planted 100,000 more acres than we had in the original March 31st Planting Intentions Report. The trade was looking for an average guess of 90.8 million acres, with the highest guess at 91.5 million acres planted. It got 92.3 million, a huge difference.

The corn stocks guess was at 3.302 on the average, but USDA came in at 3.67 billion bushels on hand.

The soybeans were not as dramatic, but the results were similar. The trade expected 76.53 million acres of beans planted, but USDA says we got in 75.2. This makes sense if you believe we planted more corn, so we have less soybeans. It also makes sense when you talk to farmers who say they would rather gamble on late corn than late beans.

The beans stocks also came in high, at 619 million instead of the expected 596 million. On these numbers the July corn futures, which are going into delivery period and had no limit, dropped 69 cents on the 30th, something which has to be seen to be believed.

The low was actually at 6.16 1/2, down almost 82 cents on the day.

Did we miss it?

For months we have been looking at the July futures being wildly higher than the September and wondering how that would sort out. Right now, it seems that the July is dropping to meet the September, which is not our first choice.

The soybeans dropped 26 cents Thursday on the July contract, to close at 13.06. The low was actually 12.95. Remember that in early June we were at a recent high of 14.19.

The July wheat was worse, with a drop Thursday of 56 1/2 to the close of 5.84 3/4, and a low of 5.83. The high in the end of May was 8.26, which now seems a long time ago.


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