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Rain, rain, go away

Agriculture.com Staff 09/21/2006 @ 2:40pm

The rain is appreciated by many, but not by farmers trying to get a jump on early harvest. It is especially not appreciated by many grain merchandisers, who figured new crop grain would be freely flowing by now. Many are caught short before meaningful harvest begins. Both basis levels and futures prices have rallied as a result.

Most trading days this week, corn open interest has declined, giving the rally a feel of short covering. People who were short scrambled out of their contracts as the expected harvest and selling did not materialize. Waves of buying in recent days have accelerated the price rise.

Farmers have questioned the reason for the rally, perhaps not as surprised as the market by the rain. But, it is apparent that this has been a chance for farmers to straighten out the last of any old crop mess or make wanted sales.

While the soggy weather has a bullish feel to it right now, many will watch how the market acts when harvest resumes across the Corn Belt. Perhaps these corn prices (20 cents off the low futures price plus an improvement in basis) will change farmers' behavior. Perhaps the lack of an LDP, a change from previous years, will paralyze marketing of corn. Farmers have been used to the strategy of aggressively taking the LDP and then holding the grain for a rally. No LDP, no cash flow-what happens? More corn could go under loan, making it hard to pry out of farmers' hands.

The rain is appreciated by many, but not by farmers trying to get a jump on early harvest. It is especially not appreciated by many grain merchandisers, who figured new crop grain would be freely flowing by now. Many are caught short before meaningful harvest begins. Both basis levels and futures prices have rallied as a result.

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