Views on commodities and energy
CBOT traders eye U.S. corn harvest delays
By the U.S. Thanksgiving holiday the American corn and soy harvest is usually wrapped. But as of last week, farmers still had more than two billion bushels of corn sitting in the field, or more than 15 percent of this year’s projected output of 12 billion bushels.
The U.S. Department of Agriculture will release its next crop progress report of the year on Monday afternoon after the close of trading. That will give the U.S. grain industry a better idea of how much corn is left to harvest at the onset of winter.
Corn is usually left to harvest after soybeans, so the mature crop can dry in the winds and bring kernel moisture down to the 15.5 percent levels that commercial elevators demand. This way farmers avoid “docking” charges and don’t have to pay to dry the grain themselves.
But due to late planting and other weather events this season like record flooding in the Midwest, many farmers have had to wait for maturity — too late, in some places like the Dakotas which are already seeing corn covered in snow. Those fields won’t be harvested until spring and the farmers are facing potential “lodging,” or downed corn, and other yield losses from the exposure.
“To think losses are not going to be there to some degree would be naive,” analyst Don Roose at U.S. Commodities in West Des Moines, Iowa, said this week.
The grain trade will not know the final output numbers until mid-January when USDA issues its annual final assessment . But most traders are anticipating the government to trim its corn production number at that time, and possibly later.
Despite this supportive uncertainty about final yields, corn prices slipped to one-year lows this week as demand questions outweighed supply. Curtailment in demand amid the deepening global recession and fears of counter-party risk kept cash sales limited.
Corn exporters are also feeling the effects a huge supply of global feed wheat for sale and the ailing ethanol industry is limiting its purchases of corn, CBOT traders noted.
On Friday, the largest publicly traded U.S. ethanol prouder, VeraSun, said it had stopped receiving and processing corn at “certain” of its plants while it seeks additional financing.
Wheat and soybeans were also under pressure last week. But there is still a sense on the trading floor that the grain markets may be bottoming. But for that to happen the stock markets need to start stabilizing, traders said.
The sharp reaction rally on Wall Street late on Friday to news from the Obama campaign that New York Fed President Tim Geithner will become Treasury Secretary was a positive. Obama is due to introduce his economic team on Monday. On Saturday in a radio address Obama laid out plans for a massive two-year economic stimulus package.
So if confidence begins to be rekindled on Wall Street from even just high expectations for the next administration, the positive vibes could easily carry over into other credit-dependent commerce like grains.
So while the direction of the Dow and crude oil will be watched, grain traders will be focused on the dollar and on cash demand in the CIF barge and FOB export markets in the coming week, which will be shortened by the U.S. Thanksgiving holiday market closure on Thursday. The week of Thanksgiving tends to be lighter volume which could at times lead to more market volatility.
Reports to watch:
* The CBOT options report issued over the weekend listing the number of wheat and corn options exercised over the weekend.
On Friday, selling in corn escalated when the December contract <CZ8> fell below $3.50, forcing traders holding Dec puts in the $3.30 to $3.40 strike range to cover on the last day and expiration of Dec options.
Preliminary trade data from Friday posted on CME web site http://www.cmegroup.com/tools-information/build-a-report.html?report=dailybulletin on Sunday morning showed tens of thousands of put options were exercised this weekend. That may impact Sunday night or Monday morning trade.
* USDA’s crop progress report on Monday.
* U.S. Census Bureau October crush data on Wednesday.