The ag markets have exploded today, following the USDA’s report this morning that predicts a drop in expected corn 2010-11 carryout stocks to 902 million bushels. USDA also reduced the size of the soybean crop and lowered the expected carryout, shocking traders who had expected the opposite.
The market reaction has been tremendous, with most Chicago futures opening limit-up. Corn is up 30 cents; soybean’s up 70 cents. Wheat is up 60 cents. Doesn’t get any better than that.
Minneapolis spring wheat is up from $7.06 at yesterday’s close to $7.65. That’s pretty stunning. And Winnipeg canola is up to about $492 per tonne on the November contract, after closing yesterday at $473.30.
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
This is good for crop growers across the prairies, with the price for wheat, feedgrains and canola all surging.
I must say I am glad that my blog post two days ago, which pondered the recent setbacks in grain and oilseed prices, did not conclude that the crop market rally since June was over. I’m glad my conclusion was that none of the big three crop commodities had broken through trendline support levels, and that therefore it was too early to conclude that the crop price rally was over. If I, like John Cleese with his parrot, had declared it dead, I’d be unplugging my phone and hiding under my desk.
A much more gleeful character this morning must be Darin Newsom of DTN, a market outlook of whose I listened to yesterday. He concluded that the most bullish outlook of all the commodities, including grains, metals, energies, was corn. And he said that corn could haul soybeans and wheat along this fall. Both soybeans and wheat have weaker fundamentals than corn, he noted, but would benefit from any rally in corn.
“Of the three, it seems like corn right now again . . . is starting to gain some momentum again, where the others look like their trend may have changed. We might start to see some pressure coming into those markets. . . Â Corn could break away a bit from soybeans and wheat over this fourth quarter, given the idea that it’s fundamentals are actually more bullish than what we see in either soybeans or wheat.”
Boy, I’ll bet he’s feeling pleased right now, looking at corn take off and the others joining it. The bullish fundamentals in the USDA report for soybeans and wheat may improve his view of those crops’ prospects.
That’s what I get to find out this morning when I call him. Sometimes it’s unpleasant calling an analyst about the markets, especially when they’ve been dead wrong on something. But for Darin, I expect it’ll be a fabulous Friday.
