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Winter Market Factors Rev Up

Harvest completion, Brazil’s crop-weather are eyed.

Grain prices have been drifting for the past two to three months with prices floating back and forth, but little real price movement occurring.  

Corn went to a new low after the November bearish report where a new record-large corn yield was predicted.  But we have bounced back from those lows already and are trading back in the territory we were at before the report. 

Could it be true that finally, all the negative news is known in the grain market? After all, we’ve traded weather all year, only to discover that after a questionable start to the U.S. growing season, things improved from there. Although the crop development (and harvest) was behind all year, a nice warm fall allowed the crop to reach maturity even in northern regions. The results were good: a record yield in corn, and a second-highest yield in soybeans ever.  

Stocks are plentiful.

So why are prices bottoming? Well, prices are already quite low, especially when you consider the horrible basis we have over most of the U.S. in corn. Wheat prices are also pretty bad, and I don’t know if anyone is making money at current winter wheat or corn cash prices. 

Soybeans are a bit better, but we have this huge demand complex called CHINA that keeps buying whatever the world produces, and we are starting to count on that demand.

So, based on recent price action, this market looks more like a price bottom has been or is being formed, and that is an optimistic assessment of the situation.  

Now, in winter all the meetings will be held, and every wannabe market analyst will talk about the current S/D projections, and the large supplies. If you attend these winter meetings, you will come away thinking prices will never go higher. 

Furthermore, banker meetings will be held and operating loans reviewed and approved, and at current price levels that will not be a enjoyable event, either. If one isn’t careful, you may come away from the next four months of market meetings thinking prices will never go higher!  Yet, this seems to happen every winter following a good crop year; once the spring arrives, a new crop year arrives as well. New possibilities of a new season (and it could be a drought, flood, or any other disaster to strike) and the market will respond.  

So take heart, hang on tight for a while, and just before dawn the night is the darkest. Take heart, it will get better.

Crop progress out yesterday, 11/20, showed corn harvest at 90%, 5% behind normal as we are in the process of cleaning up the last 10% of the harvest. 

Soybeans are 96% harvested, 1% behind normal. Cotton is 74% harvested (2% ahead of normal), with sorghum 90% harvested (2% behind). 

Sunflowers are 88% harvested, 1% ahead of normal. Winter wheat is 88% emerged (equal to normal), and is rated 52% G/E, down 2% from last week and well below last year’s 58% rating at this time.  

With the dry weather the past week (which allowed harvest to advance), we had a 3% decline in topsoil moisture to 73% rated adequate/surplus, still above last year’s 66% rating. Subsoil moisture declined 1% to 70% rated adequate/surplus, still above last year’s rating of 67%. So soil moisture levels, as we move into freeze-up, are quite good yet across the country.  

Weather in South America is still calling for normal precip in northern Brazil, with above-normal precip in southern Brazil the next seven days. Argentina will see below-normal precip the next seven days, with the eight- to 14-day outlook moving toward normal precip for all of SAM.  Temps will be near normal for both Brazil and Argentina, so this is mostly a nonthreatening forecast as we move toward the finish line for planting in South America. This is almost an identical forecast to yesterday and should have almost no bearing on trade today.  

U.S. weather is calling for below-normal precip throughout the 14-day forecast for almost all of the U.S.  Temps are forecast above normal for the western two thirds of the U.S., with the Southeastern quarter below normal and normal in between. Overall, this is a decent forecast for finishing up the harvest in the U.S.  

Attention is turning away from U.S. weather conditions and toward the growing season for South America (SAM). This becomes most important for determining soybean price direction, but it’s important in corn and (to a lesser extent) wheat, as well. Corn seems to be fighting to stay above recent lows, and all markets appear to finally be forming a bottom base upon which to build a winter rally.  

But producers must be patient – bottoms typically last months, while tops last minutes. It could be two to four months before we see any significant price appreciation. But that doesn’t mean it can’t happen, and in fact, it typically happens in this fashion (slow to start as the bottom is formed).  

Ray Grabanski can be reached at raygrabanski@progressiveag.com.  
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Ray Grabanski is president of Progressive Ag Marketing, Inc., the top-ranked marketing firm in the country the past eight years. See http://www.progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com.

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