Market analyst: Slide towards harvest lows

Ray Grabanski
Special to the Farm Forum
Columnist

After a very bullish August report from the U.S. Department of Agriculture, it seems both speculative and professional traders are determined to sell this market off into harvest.

It's funny, but the market has a way of making the greatest number of people wrong most of the time, and that seems consistent with the bullish August USDA report in front of harvest. Why pay more for grain that farmers will sell off the combine anyway?

That seems to be what the market has decided, and there are some very good yields likely in the eastern corn belt, and they will be selling at the highest prices in over seven years. Expect some fairly aggressive farmer selling in areas with good yields.   

Weather includes remnants of Hurricane Ida pushing inland, with Kentucky Tennessee and states east and north of there are likely to get excessive precipitation in the next few days.

Another wet area next week will include the northwest Corn Belt including North Dakota, South Dakota, Minnesota, Wisconsin, Michigan and Iowa, as these states will see above normal precipitation, as well. Minnesota (as well as most states in the northwest) need rain as soils remain parched, but Wisconsin does not as there is isolated flooding in locations.   

We seem to be sliding lower every day, as higher night trade slides into lower day trade each day as corn and soybean harvest approaches. Why pay for grain that farmers are going to sell at harvest anyway? That seems to be the logic of this market, so prices slide lower.

Weekly crop progress and conditions for Aug. 30 showed unchanging corn and soybean conditions. Corn was unchanged at 60% rated good-to-excellent (G/E)  versus 62% last year. Soybeans were also unchanged at 56% G/E, wersus 66% last year.

Pro Ag yield models rose slightly, with corn up 0.56 bushels per acre to 178.4 bushels. USDA listed corn at 174.6 bushels. Soybeans were up 0.19 bushels per acre to 48.78 bushels, versus USDA's 50 bushels.

We show the corn crop considerably better than USDA August numbers, as it's up 3.8 bushels, but soybean yields are down 1.22 bushels per acre. The corn crop will likely be better than USDA guesses, and soybeans worse based on the current situation.

Soybean yield last year was 50.2 bushels per acre, and conditions are 10% lower than last year. Corn yield last year was 172 bushels per acre, and conditions are 2% lower than last year. Soybeans seems the farthest off, so it might be the best bullish bet going forward based on yield potential.  

Soybeans are 2% ahead of normal dropping leaves (9%), and corn is 91% in the dough stage (2% ahead of normal), 59% dented (4% ahead), and 9% mature (1% behind).

While soil moisture levels gained 3% topsoil (to 53% rated adequate/surplus), and are up 2% subsoil (to 51%) the corn/soybean crop conditions remained unchanged. That's because this crop is moving beyond the stage where rain can help it — the only thing now is that excessive rain could hinder harvest. That is not possible in the northwest Corn Belt, as soils are too dry — but in the East, it could happen (and likely has in the Delta path of the Hurricane).  

While weekly corn and soybean charts look like they've formed a top around $7.70 corn and $16.50 soybeans, wheat is still headed higher with the outlook greatly enhanced by the bullish USDA August report.

On daily charts, neither corn, soybeans nor wheat look like they've formed a top. How can that be?

Remember the market discount that futures spreads showed relative to the May corn and soybean contracts? May corn topped around $7.76 (matching 2008 highs), but December corn didn't make it to $6.40.

While May soybeans ran to $16.77 (also matching 2008 highs), November soybeans barely touched $14.80. Could it be corn runs above $6.40 again, and soybeans above $16.77 again this coming year? Will wheat run back to 2012 highs? Ironically, we might see 2022 crop values at these levels yet sometime in 2021 and 2022.

Like Yogi Barra used to say, "It ain't over till its over!"

Ray Grabanski can be reached at raygrabanski@progressiveag.com.