The market used to be bleeding lower. The bleeding became a massive hemorrhage yesterday, Oct. 6, on the Chicago Board of Trade as the commodities were all down sharply, with corn and beans down the limit.
With corn down 30 cents to 4.24 December futures yesterday, and with the soybeans down 70 at 9.22, we put in new lows and then some.
The bleeding continued overnight, with follow-through that almost always happens with limit moves. Then we saw a turn. The overnight electronic trading finished with corn up a penny, beans up almost 20, and wheat up 12-3/4.
It is fascinating that, with the news so negative yesterday, analysts were saying wheat was “strong” because it was not down the limit! We are reaching that hard for good news.
Stampede for door
As I have said for two weeks in this space, the outside, especially financial, markets are acerbating this plunge to the harvest low.
Money is running from all markets. In some cases, money is being pulled from commodities to shore up other investments.
Part of the plunge is caused by the fact that the speculators were still large longs in the market. It would look like they overstayed their welcome, and got caught in a stampede for the door, like panicked fans at a soccer stadium.
With a $2 drop in six weeks, it would appear some got trampled.
Also trampled in this market were the growers who tried to sell at high prices, but only found tapped-out traders who were unwilling to fund any more hedging. Now, they are faced with prices at levels that are historically good, but don’t fit a production budget inflated by high input costs.
Last summer, when I could not buy grain, a New York customer said that what scared him was that his corn costs had gone up so much that if corn fell back to $5, he was back to break-even. Now, his prices are below that, and so are yours.
Hang on
The scale of the break in markets is appalling. At this point, corn has now gone down almost $4 from the June 27 high at 7.9925. Overnight, we traded 4.16-1/2 before bouncing to 4.25.
The November beans have lost an incredible $7.20 since early July. The low was 9.16-3/4 overnight before a bounce to 9.41-3/4.
We are looking for the harvest low. In this case, the low is not being pushed as much by harvest as by the financial meltdown. We may look back at this as being turn-around Tuesday. Or, the bounce overnight may not mean anything. Get in, sit down, and hang on!
What happens next? We are seeing disappointing harvest yields, especially of beans, in some places. What corn I hear of is off, but not as much. Will this be the factor that turns the market around? If it is, you heard it here first. It the market continues south, forget I ever mentioned it!
