(Farm and Ranch Guide) – While the stock market took some wild swings in late August, the corn market stayed relatively quiet.
According to news reports, China was in an economic slowdown. The Dow Jones Industrial Average reacted strongly to the news on Aug. 24 with a drop of over 1,100 points. Swings of 200-300 points continued through Aug. 25 and Aug. 26.
The Dow finished Thursday, Aug. 27 up 369 points from the previous day at 16,654, and a gain of 619 points for Aug. 26-27 was the largest two-day rally in the Dow’s history.
During that timeframe, the CME Group December corn futures traded in the $3.74-$3.77 per bushel range.
“Should we be concerned in the ag commodity markets with these outside market issues? In my opinion, no. This is not a 2007-2009 break in terms of the GDP (Gross Domestic Product index). The U.S. economy is still showing a general – anemic, but general – growth,” said Rich Nelson, chief strategist for Allendale, McHenry, Ill.
Nelson spoke at the Allendale Ag Leaders webinar on Aug. 25. On Aug. 27, more news noted that the U.S. economy grew at a rate of 3.7 percent in the second quarter – much higher than expectations of 2.3 percent growth.
Still, the corn market didn’t change much.
On Aug. 27, the CME Group traded with December corn at $3.77, March at $3.885, May at $3.92, July at $4 and Sept. 2016 at $3.925 per bushel. Compared with prices back on Aug. 13, the December contract was 2 cents higher, March was 2 cents higher, May was 1 cent lower and July was 1 cent higher.
“Our number one point is still suggesting we feel grain prices are made on grain fundamentals,” said Nelson. “Supply plus demand equals price.”
The Aug. 27 weekly export report noted a corn net sales reduction of 131,800 metric tons (negative 5.2 million bushels) for 2014/15. For 2015/16, new sales were 986,600 metric tons (38.8 million bushels).
The trade is turning its attention to the Sept. 11 USDA Crop Production report. The World Agricultural Supply and Demand Estimate (WASDE) will also be released that day.
In the Aug. 12 report, the USDA estimated an average yield of 168.8 bushels per acre.
“I think it’s pretty safe to say that the current trade’s mindset … probably (in the)164-165 range, probably is very realistic where yields will end up for corn,” said Nelson.
The August WASDE report estimated the average U.S. farm gate price at $3.35-$3.95 per bushel.
At one elevator in western Minnesota followed in this column, cash corn on Aug. 27 was $3.16 per bushel with a basis of 59 cents under. Compared with Aug. 13, the bid was 7 cents higher, and the basis had widened by 4 cents.
The elevator was also offering $3.23 for new crop corn in December.
Interestingly, a carry was developing, with the elevator offering $3.45 for corn delivery next June – a 24 cent improvement from the November bid.
The Aug. 24 Crop Progress report suggested that corn denting was in line with the five-year average. The corn crop remained 69 percent good to excellent, unchanged from the previous week.
While the weekly progress reports are saying that the corn crop remains very good, traders are thinking there is actually less corn around. The Sept. 11 Crop Production report will be closely watched for any changes to the average corn yield.
