As the week passed, many traders and farmers were dismayed by the strength exhibited by the corn market. And, by Oct. 8, even soybeans may have had the bear sitting up and scratching their head. Very few want to believe the harvest low is in for corn. But we need to recall that at the end of September, the corn futures closed higher for the month. So what did that mean for the month of October? A higher high or a lower low from September? The odds favored the highs.
The corn market has some concerns. First, the maturity of the crop is such that there will be some light test weights and poor-quality corn with the weather forecast. Seasonally, it is time for an end to the growing season, too early for snow and the continuous below-average temperatures have slowed the maturing of the corn crop -- whether it was planted timely or not. Moisture is still too high, and it is cost prohibitive to dry the corn down.
A drawn-out fall harvest last year had end users hand to mouth and elevators bidding down for corn because of fear of demand falling away. This year, we have an economy that the Obama administration says should see growth in the fourth quarter. So, a drawn-out fall harvest this year may see bidding for corn instead.
We have a hog industry that still is seeing numbers coming to market larger than USDA had forecast and a sugar industry that has seen world stocks tighten and demand growing so much that sugar was one of our shining stars all year as a bull. So much so, that news of Brazilian millers talking about exporting sugar so they can make more instead of sending it into the ethanol industry where the mandate of 25 percent ethanol blended into gasoline is the rule for Brazil. If so, this means that Brazil may turn in an aggressive way to corn. Brazilian production of corn is forecast to be a bit higher this year than last.
The corn market has been loaded with bears and shorts that just knew that market was going down. No one left to sell and then we get a psychological change in the environment and the market is destined for higher prices. Now, I have to say that there is no way I can, at this time, sell soybeans. I never thought the July low would come out, but it did by ever so little so far. We have huge front end loading of sales for export. Tell me where the world is going to go to secure soybean supplies between now and March of any size? The weather patterns are changed this year with the El Nino. I suspect that Brazil and Argentina have great crops this year. Parts of Brazil are seeing Asian rust earlier this year than normal.
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Wouldn't it be a great year to see the stevedores strike? Wouldn't be too surprising with all that crop needing to move. Besides that, world stocks are forecast to get tight into February and no one seems to notice.
The bears are selling for only one reason: Anticipated good crops with a larger carry-out. But, even then, the U.S. carry isn't so burdensome. If it is true that the U.S. economy is getting better, then the world economies will pick up as well. Why be bearish in the face of that when the world's largest growing economy, China, had trouble with drought that downsized its corn crop. Add to that the record numbers of hogs in China (448 million head?) and there is going to be a need for soybeans, not only for soyoil but for the protein as well. The day will come to be bearish, I just can't believe it is now. The bottom line: I wouldn't sell soybeans with wooden nickels.
