The summer is over, the combines are running and we are still looking for some secrets that unveil the mysteries of the grain markets. Sadly, there are no mysteries, just the occasional surprises that jerk prices around until we get a handle on the real impact of the given shock to the market.
This week the talk was about corn prices that were hitting a three-month high and why soybeans were down six sessions in a row. The reason for the corn was that it was following the wheat markets, which were bumping into three-and-a-half-month highs.
Global impacts
Now, I have to warn you that it doesn’t take much to move prices when the market is looking for any excuse to move a little. Wheat prices were higher because the analysts (I started to say experts, but that assumes something that may be a reach …) keep lowering the amount of Russian exports, as they keep having tough weather as their crop is finishing.
The same authorities cited drone strikes on Western ships loading at Ukrainian ports. Some 20 ships have been hit so far, and that is rattling the nerves of those shippers and insurers moving freight out of Ukrainian ports.
Added to the effect of the underperforming yield of Russian wheat is the phenomenon of surging crude oil prices. Oil is up over the burgeoning war between Israel and Iran. Trouble in the Middle East always translates to higher oil prices and for good reason. Oil prices have an effect on grain prices as speculators see them as “volatile commodities” and wont to gamble on them.
Interestingly, these bits of international interest had no effect on soybean prices.
There, the prices had been declining for as long as six sessions in a row because of forecasts of rain in dry areas of Brazil.
Weather at home
Then, we have the domestic weather, which could affect the market in either direction. The Central Corn Belt is remaining dry and hotter than normal. This is either cutting the crop as the dry weather hurts the last ear fill, or it is helping harvest by accelerating dry-down and continuing our early combining.
The farmers will feel like the harvest is going well, and that is good, but the fast and early harvest can contribute to harvest hedge pressure which hurts prices. So, first we guess what is going to happen, and then we guess what will be the result.
Our harvest is early. The soybeans in the 18 major states were 30% cut, versus a normal of 27%. That was as of Oct. 6. The harvest would probably be even further along, but the great drying weather has farmers waiting for dry-down and in no hurry to get the harvest moving.
The Ohio harvest shows a little more hurry-up, as farmers have learned to get the crop off before inclement weather. We are 22% harvested in corn versus a normal 11%. The Ohio soybeans are 35% harvested versus a normal 23%.
Market trends
This is the time of year when farmers have a tendency to ignore marketing for the joys of filling the bins. Thankfully, prices have recovered from the lows, and this lack of attention may not be so dangerous this year.
A price year is interesting mostly because we do appear to have found that bottom, and because it focuses our attention on how far prices did drop over the summer as crops developed. December corn futures had a high of just under $5 ($4.96 3/4) on May 15.
We dropped to $3.85 Aug. 26 and then rallied to $4.34 1/4 Oct. 2. For soybeans, we were most recently, the evening of Oct. 7, trading at $10.34 3/4.
That means we dropped $1.11 1/2 and then bounced almost 50 cents. We have lost 7 cents of the bounce in the last few days.
November soybeans peaked at $12.30 1/2 in early May, when farmers were looking for $13 beans. Instead, we dropped $2.85 1/2 to $9.55 on Aug. 16.
That was scary, but it helped when bean prices rebounded to $10.31 1/4 Sept. 9.
After a setback, we traded another high of $10.69 1/2 Sept. 27. This is the high we are currently retreating from as we were trading at $10.34 3/4 (Oct. 7).
Chicago wheat futures have been volatile recently. If we go back awhile, the December futures high came May 28 at $7.59 1/4. We then experienced that staggering, steady decline to $5.22 Aug. 26. Do the math. That is a loss of $2.37 1/4. By Oct. 2, we were back to $6.17 1/4, a bounce of nearly a buck. We were trading just below $6, up five and a half cents on the night session Oct. 7 as this was being written.
We are not getting any big surprises with the harvest, so I expect the market to trade the same things next week that we saw last week. Look for a fast harvest and some harvest pressure that causes us to test the recent lows.
