Reports on crop conditions and private surveys of crop size have contributed to new contract highs on the Chicago Board of Trade as we inch closer to harvest.
Changes in corn supply has had a bullish reaction, with soybeans higher even with little change in the market perception of crop size. The wheat has gone along for the ride.
Talk Monday centered on the Pro Farmer crop tour, which threw some new fundamental numbers into the market mix. Pro Farmer says the corn is not as good as thought previously. Special notice was taken of declines in the northwest portion of the Corn Belt.
Their estimate was for 12.8 billion bushels, at 147.9 bushels per acre. This is significantly below the Aug. 1 USDA Crop Production Report. That report had us at 153 bpa and 12.91 billion bushels.
The corn difference is not huge, but it is in the right direction for a correction in the market.
Recently we have been making new contract highs, and one reason now given is that the Pro Farmer numbers were already leaking into the market.
Corn prices had broken a little lower in early August, leaving me to wonder if the top was in. After the high of 7.15 3/4 December futures Aug. 2, the market dropped to 6.81 on the 8th. We used to think that was a significant change. This time the market came back with one day unchanged and 11 of 15 days higher.
The result was Monday’s high at 7.75 1/4, nearly 60 cents above the early August high. This is a very high price, and is high going into harvest as if this is a short-crop year.
The change this week is that, not only has the corn market continued to make new highs, the highs have been in bigger increments, and the soybeans have been dragged to new highs.
Previously, the beans had turned higher, but not made new highs. The soybean chart had been a beautiful example of a market that was trading in a large range and making successive cycles in the same range.
The old high was June 3 at 14.03. We dropped to 12.88 on the 30th, then bounced to 14.08 on July 19. By Aug. 10, we were back down to 12.94. Then the chart took a breakout to the upside.
On the 26th, Friday, we blew through the old high and wet as high as 14.25. Monday we posted a high of 14.54, up another big day, and making a high more than 50 cents above the old high.
Again, this is happening going into harvest.
At this point we may see a “Turnaround Tuesday” come into play. Prices are down sharply in the overnight trading. The December corn is down nearly a dime, the November beans are down eight and a half cents.
It remains to be seen if this trend continues or if we just saw the highs again. Supposedly the outside markets are hurting us today. The Dow was up yesterday, Asian equity markets are up overnight, and the dollar is down. I can argue, however, that all three of those factors lead to higher prices, not lower!
What I know for sure is that this remains a selling opportunity. Don’t look back at $7 corn and $14 beans and wonder why you didn’t sell those numbers going into harvest!
I know there is a lot of uncertainty about yields, and that makes it hard to sell. That uncertainty is what is providing the sales opportunity.
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