Views on commodities and energy
There’s nothing like a little volatility before a holiday. A week after touching $7.50 a bushel for only the second time in history, Chicago wheat prices on Friday morning vaulted past $8 — to an all-time high of $8.07-3/4 basis the December contract. Then came the profit-taking to a close of $7.75-1/2.
Wheat was on the run again all week — all summer for that matter. So cashing in on the rally only made sense to Chicago traders and the hot-money hedge funds before the 3-day summer-ending Labor Day U.S. holiday weekend.
End-month profit-taking added in some incentives for the big managed funds that have helped power the rally.
Corn and soybeans in the last week of August again seemed to be hiding behind the glare of wheat’s push to uncharted highs. Advancing corn harvest in the mid-South and reports of big yields — 175 to 200 bushels per acre — in the southern Midwest worked to keep corn prices delinked from wheat gains.
Soybeans, on the other hand, appeared to be caught between the two grains, looking for a reason to move.
Beans managed to puncture some technical chart resistance during the week, as benchmark CBOT November prices rose above the 50-day moving average. But traders said the market will need more incentive next week to penetrate key resistance at $9 basis the November, the key harvest hedge contract.
Reminders of what the CBOT soybean strength will mean for coming South American planting and forward pricing also hung in the background, a restraint on gains.
The bulls, on the other hand, still seem to be in love with wheat.
On the fundamental side, tight global wheat stocks and worries that extreme weather conditions in Europe, Argentina, Canada and Australia will cut world wheat supplies further still retain potential to fuel more upside breaks, traders said. Chart-based shortcovering has added to the wildness of such technical breakouts.
Traders will be watching to see if Australia’s wheat country gets a much-needed weekend drink before CBOT screen trading reopens on Monday night.
“There was some speculation that there was some improved rain chances for Australia, but there’s still a question about coverage,” one CBOT trader said of wheat acreage moisture.
Heavy rains could stir some more profit taking in CBOT wheat. But if it’s dry in Australia over the weekend, there’s no reason to believe that wheat couldn’t jump past $8 again and move higher, traders said.
“Today’s close wasn’t anything more than end-of-the-month, end-of-the-quarter, rebalancing-type positioning,” said the CBOT trader on Friday afternoon. “I don’t think people are getting too worked up and saying the high is in.”
One clear trend seen as wheat rallied the past week is a decline in open interest.
Many believed that drop could be attributed to big speculators and professional grain traders being blown out of “contrarian” wheat/corn spreads they had put on as the price difference between the two grains — $4 to $5 in the nearby contract months — defied historical trends of $1-2 a bushel.
Those speculators that had sold wheat and bought corn in a counter to that differential, betting that the spread would narrow — and exiting the market to stop losses in the face of wheat’s continued push into uncharted heights.
Scouts on the John Deere Pro Farmer Midwest Crop Tour prefer to get in, get out, and get back on the road.
Northwest Iowa is wet… saturated, really. Excessive rain over the past few weeks has left a few corn and soybean fields looking more like rice paddies.
These are the longest days of the crop tour. Some of the more experienced scouts come armed with rubber mud boots and full-on rain suits. Others, like myself, pack a flimsy “city boy” rain poncho that’s more of a trash bag with a drawstring hood. I have no intention of bringing my mud-caked, semi-waterproof hiking shoes home with me, although the disposable plastic boot covers donated to our crop-scouting cause by a local veterinarian are keeping my feet dry for the moment.
The storms that rolled through this part of the Corn Belt last night dumped more than three inches in some areas, with perhaps another inch today. It’s raining cats and dogs, as they say. Recent heavy storms had already packed a one-two punch of rain that softened soils. Wind knocked over some plants like dominoes.
One corn field on low-lying ground in Henry County, Illinois, showed an estimated yield of 26.7 bushels per acre, a figure that jumped out when compared with our projections for three other fields in the same district, at 154.8, 160.1 and 193.7 bpa.
Lunch on a Farm Belt crop tour is more than a meal — it’s an opportunity to explore small-town eateries way, way off the beaten path, and seek out the unique local dish.
Most scouts hit the fields starting at around 7 a.m., so by noon it’s easy to work up an appetite. That helps us embrace home-style foods we might normally shun for reasons of cardiac health. I’m talking about gravy. And dessert.
Hot weather in August cut the yield potential of Indiana’s soybean crop, but prospects for the state’s corn were roughly the same from a year ago, according to scouts on an annual crop tour. They sampled 99 Indiana corn fields on the tour this year.
Some corn fields that looked healthy when viewed from the road produced undersized ears or low plant populations. “I would say (crop potential) is extremely variable, even though it appeared good,” said Byron Jones, a farmer from Saybrook, Illinois (pictured right).
Said Mark Bernard, a crop consultant for the eastern leg of the tour. “After seeing Ohio the day before, I thought maybe we would be looking at a disappointment in Indiana. But I was slightly, pleasantly, surprised. They probably got a little more rain at the right times.”
At 6-foot-3, I’m taller than the average crop scout. But I can easily get lost in some of these
Nebraska corn fields this year. Plants in some fields are more than 10 feet tall, with ears as big as my forearm. Get into a good spot in the field and the canopy completely blocks out the sky, ruining any chances of navigating by the sun. The crop scout’s goodie bag contains a calculator, insect repellent, sunscreen, but no compass and no GPS.
It’s not unheard of for a scout on the tour to get lost in such a jungle. A few years back, one woman got lost after she mistakenly walked in the wrong direction after taking a sample. The sound of the corn’s thick leaves rustling in the wind drowned out her fellow scouts’ attempts to guide her back to the car by honking the horn. She emerged more than an hour later on the other end of the field, slightly shaken but with a vivid story to tell later at the crop scout meeting. The corn crop will no doubt be a bin-buster this year as farmers planted more acres than any time since 1944. The U.S. Agriculture Department on Aug. 1 estimated Nebraska’s crop at 1.4616 billion bushels, up from 1.178 billion last year. Yields were seen at 168 bushels per acre, up 10.5 percent from last year’s 152 bpa crop, according to the USDA.
Grain traders like to say “Rain makes grain.” On a crop tour, it makes for grumpy crop scouts — especially when the scouts are farmers who have not seen decent moisture all summer, until now.
I spent Monday with three such farmers, scouting corn and soybean fields across northwest Ohio on one leg of the John Deere Pro Farmer Midwest Crop Tour.
We drove through showers much of the day, varying from light to heavy to near-biblical. We got plenty of firsthand exposure to the region’s rich, clay-colored soil each time we would venture out into a field, take our measurements and return back to our van, the soles of our boots caked with a thick layer of mud. Scraping our feet against the edge of the rural pavement had only a limited effect.
The long, wet road from Chicago to Sioux Falls, South Dakota, goes through Denver… at least for this crop scout. Powerful thunderstorms cancelled one of my flights, delayed a second seriously-rerouted one, and added nearly 1,000 miles and 8 hours to a 450-mile trip that shouldn’t normally take much more than an hour.
Other scouts on the John Deere Pro Farmer Midwest crop tour, some traveling from as far as Argentina, Brazil, or Great Brittain, had an equally difficult time getting to Sioux Falls because of the storm, arriving as late as 3 a.m. for a brief nap before Monday’s 7 a.m. start. Bloodshot eyes and extra large cups of coffee, which usually begin showing up around day two or three of the four-day tour, were the norm on Monday morning.
Mud boots, check. Sun screen, check. Bug spray, check.
The corn is 8-feet tall, the soybeans are setting and filling pods and harvest of these key food and livestock feed crops is only weeks away. That means it’s time for the annual tour of central U.S. farm fields in an aim to assess yields and production.
Corn and soy are among the Midwestern pillars of the country’s multi-billion-dollar agricultural sector, consumed by people from Indonesia to Iraq. The condition of the new crops impacts pricing and purchasing decisions around the world.
More than 70 crop specialists are expected to participate in the industry-sponsored tour, which begins Monday and includes farmers, merchandisers and government officials. Driving from field to field in key growing states like Iowa, Illinois, Nebraska and Minnesota, the crop scouts will inspect corn and soybean fields in the heart of the U.S. grain belt.
Colleague Karl Plume and myself, both reporters for Reuters, will be joining in on the four-day jaunt, which organizers have broken into western and eastern segments.
The U.S. Department of Agriculture last week forecast this year’s U.S. corn crop a record 13.054 billion bushels, with an average yield of 152.8 bushels per acre, the second-highest yield on record.
That is largely due farmers this year planting the largest amount of corn land – 92.9 million acres – since 1944 to take advantage of the rise in corn prices to 10-year highs in February this year amid demand from the ethanol sector.
Still, some crop specialists worry that a lack of rainfall in recent weeks in the southern Midwest could drop soy yields.
In fact, the USDA, in its monthly report on Aug. 10, lowered its U.S. soybean crop estimate to 2.625 billion bushels, with an average yield of 41.966 bpa.
The crop scouts will come up with their own estimates at the conclusion of the tour after viewing hundreds of fields and getting down in the dirt to measure such things as corn ear lengths, numbers of kernels and soybean pods.
Hundred-degree days, 12-hour drives – here we come!