For the past few weeks, we have thought the markets were hunting for a bottom, especially the corn market. New crop corn futures had lost 76 cents, new soybeans had lost 78 cents. The way seemed to be pointed higher, if we could just find the bottom and bounce off it. Some days we would go higher briefly, and the thought was that the bounce was finally here.
Well, as they say, that was then and this is now. Now we are looking at the worst one-day trading in years, and the market is struggling to decide what low prices really are.
USDA report day
Monday, June 30, USDA updated their grain stocks and planted acres numbers, and the market staggered, then crashed. Frequently, a crash of this magnitude is followed by some bounce, but this Tuesday morning we are just stirring the ashes after the crash and burn.
Soybeans led the markets lower Monday, losing 70 3/4 cents on a nearly 85-cent range. We closed November futures at 11.57 1/4 after a low of 11.51 1/2. This (Tuesday) morning we are down nearly an additional dime, and 11.47 1/2.
The December corn futures followed the corn lower, with a loss of 22 cents. The previous low was 4.36 3/4 on June 24th. The low Monday was 4.23 1/2. There was a little follow-through over night, with a low of 4.20 1/2. We are currently just a half-cent above that.
Rounding out the grain complex was the wheat crop, where September futures on the Chicago Board of Trade made a low of 5.67 1/2 Monday, then a low of 5.75 early Tuesday.
The wheat chart has been in steady decline since the May 6 high of 7.51-3/4. Seems like a long time ago, and a long way to go. We had ticked higher the last couple of days last week, but the wheat could not fight off the bean mess.
So, what was the mess USDA stirred up? In the March Quarterly Stocks estimate, USDA put us barely over 7 billion bushels of corn on hand. By the June estimate we were down to 3.854 billion bushels, but the average trade guess of the corn still on hand was 3.722. So, we have 132 million bushels more than the market thought.
The soybeans were a relatively worse proposition. The June report showed 992 million bushels on hand. The June report put us at 405, but the trade expected 378. That is not a lot of difference, but it is in the wrong direction.
For a couple of months we have been speculating about whether we could import enough beans to squeak the processors through to new crop, and now we found we have 27 million bushels extra.
The wheat stocks came in actually a little under the estimate, at 590 million bushels instead of 598.
What got planted
The real damage, however, came in the acreage report. USDA had previously said we would plant 81.493 million acres of soybeans. In fact, they now say we planted 84.839 million. That is three and a third million acres more than the market expected, and is the real reason for the crash Monday.
Corn acres came in at 91.641 million, less than the expected 91.725. This number would be friendly to new crop prices if it were not for the soybeans.
It remains to be seen if we can get away from this report a little and get corn trading a little higher on its own.
Corn futures are now trading at the lowest level since December of 2013.
These government numbers have changed some of the market fundamentals. We now need to sort out the reality of what is ahead.
We see no reason for a weather market, with adequate rain going into the pollination period of the earliest corn and rain continuing in the forecast for later areas. We have been too cool, but the last few days have been in the 80’s, so corn is starting to catch up.
To my eye, the corn is a little yellow, with perhaps too much rain and too little sunshine. It has grown out of some of this the last few days.
We still need a couple of more good days to get the sidedressing going again in the corn. The ammonia season is barely more than half over by some accounts, and it should be done. A few more days and most of the corn will be getting a little tall to get an applicator though, even with the late planting.
So, the trend will be to worry about the crops and defer thinking about this ugly market. The phones don’t ring much with farmer sellers in grain offices these days!
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