Prices are dramatically higher on the Chicago Board of Trade this Turnaround Tuesday morning, July 18. Corn is up 12 cents, Soybeans are up about 14, and the wheat is almost a dime higher. This spike comes after a big correction the last few days took the fun out of a weather rally.
The bounce back results from USDA Crop Condition reports that continue to decline, and from long-term weather predictions that we will continue to be dry in the current dry areas of the western Corn Belt.
The spike on dry weather comes even as the eastern Corn Belt is too wet. In Ohio, generally, we have had too much rain. One farmer told me yesterday that you know something is wrong when visitors to his Trumbull County farm from Illinois were impressed with his crops!
The same week that farm newscasters could not get enough of how dry the Dakotas are, the TV’s are showing floods in Illinois.
There is no doubt that we are too wet in eastern Ohio. The beans across the road from my office have bare patches now where the flooded spots have given up. I can count six hay fields within a one-mile radius that will have ruined windrows burned or chopped back on the ground soon. The corn is up and down with the tile lines. The beans are squatty and yellow.
We knew that we would not have record crops when we lost the month of May to cold and wet weather. We hoped for hot, dry catchup weather, and did not get it. Now the dry weather is coming where is was already too dry.
USDA is releasing the Supply and Demand Report on Aug. 10, and traders are expecting major yield reductions. The yield reductions are indicated by the crop condition reports out Monday afternoon.
The U.S. corn crop is now rated 64 percent good and excellent. That is off 1 percent from last week, and is down from 76 percent last year. The Ohio rating is worse, at 54 percent good and excellent.
The soybeans are not as bad, but have declined this week in the country from 62 percent to 61 percent. We were at 71 percent this time last year. The Ohio soybean crop Is rated at just 50 percent good and excellent.
The price upturn this morning represents a good second chance for pricing some new crop and giving up on the old, if you are still holding.
As usual, the gut-wrenching decision is to guess how far the rally can run now. Is this a one-day correction, or is this a trend? Are we buying the rumor of the disaster brought about by the predicted two weeks of dryness, or selling the fact that the dry weather will improve the eastern crop?
December corn futures are currently trading at 4.00 1/2. That is up almost 15 cents for the day, but well off the high we made at 4.17 1/4 on the 11th, just a week ago. Just last Thursday we were as low as 3.81 3/4, so prices change fast in these weather markets.
November soybean futures are trading just under 11.12 this Tuesday morning, but they were 10.47 on the 11th, then clear back down to 9.84 on the 14th.
September Chicago wheat is at 5.15 1/2, but this contract has been especially wild. The low was at 4.63 1/2 recently, on June 26. The high came a few days later at 5.74 1/2 on July 5. The 17th, it was back to 5.02 3/4. That pretty much defines volatility!
Suffice it to say, you need to keep a close eye on things.