Waiting on the grain stock report for answers

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Fall harvest, 2018
Fall harvest, 2018.

The best that can be said about last week is that nothing much happened, in prices on the Chicago Board of Trade at least. It reminds me that pappy once said, “When Congress doesn’t accomplish much, that’s a good thing!”

Corn contracts changed only fractionally for the entire week. Soybeans made a new low, and then rallied to close up a penny. That actually is more than nothing, as it demonstrates some support, even as harvest is getting rolling in the heart of the Corn Belt, especially on soybeans.

Early harvest can bring surprises in yield reports, but so far, reports have been inconsistent and have not affected the markets.

There are those with record yields, those who are disappointed in the soybeans cut so far — just like normal. Farmers in the west who have early corn are running combines to capture what is very high basis in an area starved for the last bushels of the 2020-2021 crop and worried about the supply in drought-stricken areas in the northwest portion of the Corn Belt. Basis can be plus 60 December for a few days in an area that normally sees “unders.”

Locally, harvest started with some soybeans cut across from my house Sept. 25. That was also the first field I saw planted. More harvest action will happen this week.

The corn is drying down, but it is early and any propane for drying that was not pre-priced will be expensive, as prices have rallied since April.

If we have not seen harvest lows, this early in the harvest process, then we soon will. The supply picture would suggest that we can’t get too low, and that higher prices are ahead.

Unfortunately, many of our higher input costs lead us to believe that prices have to get higher to give us a profit for this crop and the one to come. Some help is coming in our understanding of the fundamentals underlying this crop.

Grain report

The U.S. Department of Agriculture Sept. 1 grain stocks report will come out Sept. 30. This will peg the ending stocks for what is now our last marketing year, which ended Aug. 31.

It was significant that the last report predicted 1.175 billion bushels left over. I have referred to this in previous writings that this represents bare pipeline supply.

In anticipation of this new report, some analysts believe the actual carryout was even less, at a billion bushels or so. This not only affects our current market, but the old carryout becomes the new carry in!

In other words, we start the year with less, so we are likely to be tightening up the 2021-2022 crop, which eventually helps prices.

Soybeans larger

In contrast, the soybean carryout may be confirmed as a little larger than predicted. The market anticipated fairly large imports of soybeans at the end of the year to keep processors going.

Some farmers found the supply of beans was uncertain enough that processors were reluctant to forward contract soybean meal. Now it is believed that we only imported 35 million bushels of soybeans, a fraction of some predictions.

Look for the ending carryout to be reported at 150 to 175 million bushels, which means our crop was larger than we thought.

If these thoughts are confirmed in the Sept. 30 report, which you will know by the time this column hits your mailbox, we have even more reason to think the harvests lows may already be in, especially for corn. That the soybeans bounced off support last week is also encouraging.

Prices

Let’s look at prices. December corn futures have had a consistent pattern of lower highs. On Aug. 12, we had a high of $5.941⁄4, but by the end of the month, we had a high of only $5.363⁄4. We actually broke below the magic $5.00, to $4.971⁄2 Sept. 10, but rallied to $5.413⁄4 briefly the morning of Sept. 28.

November soybean futures were, the morning of Sept. 28, at $12.83, down four and a half cents. Soybeans have also had a declining pattern. On Aug. 17, we had a high of $13.793⁄4, but by Sept. 21, we put in a new low for the contract at $12.571⁄2.

On Sept. 27, we got as high as 12.97, so that is encouraging. Chicago wheat futures were up 15 cents last week, and remain in high territory. December futures were trading at $7.211⁄4 the morning of Sept. 28, down a penny. This comes after a low Sept. 10 of $6.77.

The big high of $7.861⁄4 in the middle of August is gone, but prices remain historically in a high range. Remember, wheat prices have been led by small acres and a poor crop of Hard Red Spring Wheat.

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