The market almost always overreacts. This is why, a week ago, I said that the bump in grain prices was a sales opportunity. Fundamental news in the form of widespread crop damage in Iowa had spiked prices, and I expected this fundamental change to be a one or two-day blip in the market. I was wrong.
Insurance adjusters are still surveying fields in Iowa, and cash and futures grain traders are firming up prices as the results come in. On Sept. 1, I heard one farmer in Iowa opine that he was surprised when the adjuster got done. He rated his crop as 100% destroyed for 100% of the acres. The farmer did not expect it to be that bad. It was now his job to disk up what was left.
Bullish?
Add to this news the fact that forecast rain for the Midwest has been spotty and light at best. Add the new forecasts that now show no rain. Stir in the discussions by farmers scattered over the Midwest who are looking at large areas of crops that are burning up for lack of rain. Flavor with the news that the Chinese have bought two more large lots of corn. The result of this news baking is a cake with a frosting bull painted on the top.
Still, everything is not bullish. Crops in some areas are great. Nebraska is dried up, but 70% is irrigated, and the irrigated acres have the best crops ever. Southern Minnesota has just the rain it needs, as does the eastern Dakotas. Illinois crops are great where the derecho did not get them. Indian and Ohio have good crops. One of the driest areas is Iowa, which has most of the derecho problems anyway.
September report
On the horizon is the Sept. 30 U.S. Department of Agriculture grain stocks report. This is the last gasp for USDA to essentially reduce the crop production numbers from last year.
Most of us think they were too high, but we have been forced to trade them all year. When we get to the end of the marketing year, we count what is left, and the mystery is revealed, if there is one. So, analysts are encouraged that prices have a reason to be higher. They have been for five trading sessions in a row.
Unfortunately, the market was taking a breather Sept. 1. December corn futures were down three and a quarter cents. November soybeans were down a nickel. As expected, USDA cut the crop ratings significantly in the Aug. 31 reports. The nations is down 2% on the corn ratings, to 62%. Iowa’s corn condition is down 5%, to 55%, after an 85% rating in early July.
The U.S. soybean ratings of good and excellent are down 3% to 66%, with Iowa off 5% in the beans, also. Ohio ratings for corn were at 40% good and 5% excellent, for a 45% total. The soybeans were at 47% plus 7%, for a 54% total.
Local weather
Locally, conditions have been very dry, with crops hanging on with the moisture from earlier in the year. A graphic I saw a few days ago had Eastern Ohio receiving only 20% of normal rainfall in August. Some corn fields had leaves fired in limited areas where there was compaction.
Then, we got an inch of rain late in the week to keep us going. Our corn crop is later than that in much of the Midwest, and we still need rain to finish it. The soybeans have mostly grown out of the short conditions of June, but need rain to fill pods.
Father west, farmers are talking about crops drying up already, some because of early planting and early varieties, and some prematurely from drought.
