The old gray mare has loped


The old gray mare, she ain’t what she used to be. You know the one — she galloped in and got you all excited about how fast she was, then ran out of steam.

No, she looks like a nag you were a fool to bet the farm on. She looked like Secretariat’s great-granddaughter, but now you realize she was overdue for the auction.

The old gray mare this week is the grain markets that have broken badly and are barely showing signs of recovery with small gains Monday and Monday night/Tuesday morning.

Remember Maybe “broken badly” is an understatement, Just how do you describe the market action that takes 72 1/2 cents off corn, 1.02 off soybeans, and 1.13 1/2 off wheat in just a few days?

This is a mare that stumbled in the backstretch, broke her left forefoot, and could not finish.

No, wait, that actually was a horse in the Breeders’ Cup a few years ago! They put a tent around him for the sake of the queasy onlookers, put him down, and carted him away. Not a pretty sight. About like trading grain the last few days.

Some days I am glad I am working in the “tent” of my office and not in the pits in Chicago in front of God and everybody.

While you were farming

In case you were running beans and missed it, this is a market that will be remembered for awhile. In fact, it will be some time before we have a coherent reason for the break. That is my challenge this morning.

First, look at the prices. We always say that a high price at harvest is the high for the year. That was true until two years ago when the reality of ethanol demand kicked in and gave us a higher market after a high harvest.

Right now, you can make a case for a harvest high right at the start of harvest. December corn futures rallied after the government Supply and Demand Reports of a week ago Thursday. The high came the next Monday, with December corn touching 5.28 3/4.

First, we had looked for the any futures to touch $5 as a landmark, but the market did not immediately collapse when it happened. The trading held on until all the contracts were well over the benchmark.

Then, the selling kicked in and accelerated.

Monday we closed down 9 cents on the day, and 16 cents below the high. Tuesday we actually gained a nickel, as traders took the adjustment into consideration. However, Wednesday the contract was down nine and a quarter cents, and that led to the limit-down 30-cent drop on Friday.

We made a low Monday at 4.54 1/4, and I think it was in the overnight trading. Hard to keep track of these quick adjustments some days.

Whenever, that represented a high to low of over 72 cents in a few days.

Beans the same

Similar action in the beans dropped us over a dollar, to a November futures low of 10.42. We are back to 10.60 1/2 in the electronic trading early Tuesday.

The wheat appears to be a different matter, with fundamentals there not suffering the surprises in the other grains. The chart looks flatter. Look more closely, however, and that is just because the high at 8.68 in early August has compressed the chart. Run the numbers and wheat has lost more than a dollar since Sept. 20.

Why, oh, why?

Pick your reason for the drop in corn. USDA came out with a Grain Stocks Report that showed 1.7075 billion bushels left over on Sept. 1. That is several hundred million bushels higher than trade guesses.

Analysts immediately discounted the number, and maybe even trading those feelings for two days. The argument was that we had an early start to the harvest, and that meant we had a goodly amount of 2010 crop corn counted as carryout of the 2009 crop.

Two days later the trade started trading the USDA number. The corn harvest so far appears to be confirming the USDA record crop projections. The traders were convinced USDA was too high, but they are losing their nerve.

Then, there is just the contra-seasonal impact of the market. It is the wrong time of year to rally corn, and the pressure of harvest helped break prices.

It remains to be seen if the high is in. If it is, most farmers are way undersold. Traders talk of this percentage and that retracement. No heroes have emerged to swear that this is just a hiccup.


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