Mark's Market Talk

Last week we had a decent little rally going as we headed into the quarterly grain stocks report on Friday. Within minutes of its release the board took away all the week’s gains and then some on beans. The report was not that bearish, in fact it showed we had 68 million less bushels of corn on hand September 1. They did estimate an additional 26 million bushels of beans and with the funds already in a liquidation mood Friday’s trade just snowballed to the negative side. An interesting side note of the report was the difference in farm storage versus commercial storage. Farm storage of old crop grain was higher than normal for September 1 while elevators held less than normal. The ongoing inverse in the markets had a hand in this as elevators could not afford to roll stocks into the new crop year. Farmers that were sitting on some stocks were more daring as they had sold grain for over 2 years at high prices and could afford to gamble on their leftover stocks. For the week corn was steady while November beans were down 21 cents. Wheat was the biggest loser last week as the trade recognizes that the world has plenty of wheat. The largest problem with the 3 main grains is lack of export news. South America continues to supply the world with cheaper grain than we do. Normally by this time of the year they are sold out of corn and beans and buyers come our way. However, this year Brazil had a huge harvest of corn and beans, so their supply is lasting longer. Farmers in the southern hemisphere are planting their first crop of corn and beans at a record pace. This is due to a stretch of dry weather that is causing drought like conditions to linger in Argentina. Yield reports from our corn belt are coming in fast now but getting a good handle on overall yields is still difficult. It has not been uncommon to read that farmers are seeing yields better than they expected. Does this mean the crop is truly good or did the farmers lower their expectations too much after the hot and dry summer. It might be a little of both. You can find disappointing yield reports from areas that have battled multiple years of drought. We get asked daily what are the markets going to do between now and next spring. A correct answer is they will go up and down which could be construed as a smart alec answer. We have had volatile markets for 3 years now. It appears this will continue. The world needs a lot of grain to feed the population. World grain stocks are adequate right now, but we are always one short crop, or one perceived short crop, away from shortages that can turn things on a dime. Whether that happens soon enough to rescue this market is hard to tell.