USDA hasn’t helped crop sellers by finding that everything’s pretty much as everyone’s been expecting.
This is the time of year when fears begin lifting from buyers’ minds about the size of the crop, and often the only thing that will give the crop markets a chance to rise is unexpected problems appearing. Those sorts of problems weren’t found in the USDA’s World Agricultural Supply and Demand Estimates released today.
They found that 13 billion bushels of corn are in farmers fields, which will be the second largest crop in history if they’re right. That’s 193 million bushels bigger than it expected in late summer. Corn actually rose in early trading today, but that’s because USDA boosted expected demand and that more than made up for the increase. Soybeans fell after USDA found what it had been predicting, and I think a comment from one of the market newsletters I get sums up the dynamic of the harvest market:
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“Soybeans are called two to five cents lower, mostly on disappointment that USDA didn’t come up with a bullish surprise.”
There’s the psychology: if there isn’t a surprise, if things are just the way we thought, prices will drop. Everyone’s keeping frost and lateness in their minds, so when the mixed growing conditions don’t appear within USDA reports to be damaging production or hurting quality, that concern begins to lift, and each day, week and month that goes by alleviates that sort of worry. Frost is a particularly powerful factor at this time of year – especially in this sort of a year when crops are so late – but it’s quickly stale-dating. Everyone appears to need frost free conditions until the end of September to get most of the crop in, but every day of decent weather brings another few million tonnes of crops up to maturity, into the bin and out of that danger. So the frost potential, which every trader has in mind, each day poses a danger to a smaller and smaller proportion of the crop. A month from now the market will likely have stopped thinking about frost altogether, because the vast bulk of the crop will be in and if the few dribs and drabs are hit – well, that was expected.
Stock markets are said to rise up a wall of worry. Every time a worry is alleviated, stocks can climb up that wall a bit. Commodity prices slide down a slope of worry. Every time worries about production are relieved, the need to put risk premiums into prices falls a bit more, and prices tend to slide a bit further.
