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‘It Has Been A Horrible Harvest, So Far,’ Analyst Says
Prices are relatively stagnant, with the markets not going much higher, but not going lower, either, as we plow through a harvest of record yielding corn and soybean crops.
It’s usually not the case that record crops don’t push prices to new lows at harvest, but this year was unusual in that prices were pushed down so far in June and early July. Perhaps there isn’t much more downside left?
Crops have grown by leaps and bounds since early July, with almost perfect growing conditions around the Corn Belt. Yields expanded significantly since July, and although corn and soybeans have pushed to new lows this fall, they couldn’t stay there, so we are actually trading above our July lows in both commodities. In the case of wheat, we are much higher than those lows.
So what pushed us so low in July? China! Or more specifically, the China trade disputes. China has shunned U.S. soybeans after placing a 25% tariff on them, but it is surprising how much demand the U.S. has for soybeans since we dropped $2 in prices (and now we have a firesale on our soybean production).
Many countries can’t believe their good fortune, getting a 20% discount from the U.S. (and avoiding paying $2 higher from Brazil or Argentina). So a lot of the world is buying U.S. soybeans. After all, a soybean is a soybean (not like many other products being tariffed between the U.S. and China).
The Wall Street Journal yesterday published an interesting article on tariff avoidance, with China basically reclassifying many goods to a non-tariff category and selling them in the U.S. For example, steel plates become “turbine parts” and avoid the tariff. Very clever! But how do you reclassify soybeans going to China to avoid their tariff?
Weather forecasts continue to suggest very wet weather the next seven days in the Corn Belt, with more rain today in the band from Texas to Michigan (and surrounding states). It has been an extremely wet last half of September and first half of October, and that will continue at least another week. Temps are cooling starting in the west, with below-normal temps the next seven days. The eastern half of the Corn Belt will see normal to above-normal temps, but in the eight- to 14-day, they cool down as well. Below-normal temps should dominate the eight- to 14-day forecast before warmer weather returns starting in the west.
It has been a horrible harvest so far, with the past week particularly difficult in the northwest Corn Belt. We have suffered from cold and wet conditions (rain every other day many times) that have stalled the harvest in many locations, particularly for growers without the capability of drying grain such as soybeans. Even dry bean harvest is not complete in many of the wetter areas, and what has begun as an early harvest with maturity not even being an issue has become one that has been difficult at best.
Growers are becoming frustrated with the cloudy, rainy days and cold temperatures in the northwest Corn Belt. (The east and south had enjoyed above-normal temps for much of the past few weeks until now). So this has become a difficult harvest for many.
Pro Ag notes that interest rates have moved to their highest level since 2014, and interest rates really show no sign of abating in the near future. In fact, they may be likely to go even higher as we’ve enjoyed low interest rates for a long time – much longer than anyone expected.
While harvest is difficult, the market is complacent in seeing record-large corn and soybean crops potentially coming off fields this fall, and therefore prices are relatively stagnant at these low levels.
Ray Grabanski can be reached at email@example.com.
Ray Grabanski is President of Progressive Ag Marketing, Inc., the top Ranked marketing firm in the country the past 8 years.
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