Good weather forecasts for the upcoming pollination period have weighed on the corn futures market all week, leading to lower markets. But there has been a collapse of the soybean market which has lost over a dollar in the August contract just in the last two days, $1.60 over the last three days. Analyst Mike Silver at Kokomo Grain explains there are a number of contributing factors.
“It started when China announced they were going to be pulling some beans from their reserves and of course that meant less demand for the U.S. and South American beans. We know that we had a large inverse between the old crop and the new crop prices with the old crop obviously being substantially higher than the new crop. So that China factor is in play and we’ve had a precipitous drop in soybean basis in the last 4 to 5 days.”
Silver says the market is decreasing the spread between old crop and new crop prices,”with the processors looking forward to the new crop that is about a $2 discount to the current bean price. And that negativity in the bean market is obviously spilling over into the corn market and the wheat market.”
He adds traders knew the corn basis would be dropping too, they just didn’t know when. That shift is now here.
“Unfortunately today it appears what has happened in the beans in regard to basis is starting to happen in corn. We’re picking up some pretty substantial breaks in corn basis, especially in the western Corn Belt, and here locally that of course backs up the whole system which appears to be lowering the premium in that old crop bid from a basis standpoint.”
Add those very good current weather conditions and forecasts for the 7-10 day period and even with planting and growing issues west of Indiana the trade is bracing for the possibility of bin-busting yields later in the year.
Hear more Mike Silver commentary in the Wednesday HAT Midday audio podcast at www.hoosieragtoday.com and the HAT app audio section.