Why Corn Is Playing Second Fiddle To Beans

September 6, 2013 01:04 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading fractionally to 2 cents higher, soybeans are mostly 3 to 5 cents higher and wheat futures are mostly 2 to 3 cents higher. The slightly firmer tone should carry over to the open of the day session, though weekly export sales could have some price impact. Cattle and hog futures are expected to open under light pressure as traders wait on cash cattle trade and take profits out of the hog market.


* Heat continues, corn traders don't care. Forecasts continue to call for heat across the Corn Belt with readings in the 90s widely expected through the weekend. Temps are expected to remain unseasonably hot across the country's midsection through at least mid-month. While the late-season heat is helping advance crop maturity and therefore removing an early frost threat, it is also trimming yield potential as the crop is not being allowed to "slow cook" and build dry matter. Traders, however, aren't convinced the late-season heat is harming corn yield potential. In fact, I've heard many comments that corn yields were "made" in July as temps were below normal during and immediately after pollination. That's partly right as the corn crop built big yield potential during pollination, but the late-season heat is undoubtedly taking the top end off of that potential.

The long and short of it: As I've been saying for a while now, it's going to take the corn market time to realize there are "issues" with the corn crop.

* Corn harvest underway. Some corn is being harvested early across the Midwest as producers attempt to capture old-crop prices and basis. In many of those cases, producers are taking 30%-plus moisture corn out of the field as there's enough demand pull to pay for the drying costs -- and in some cases they are being allowed to deliver the wet corn without a penalty. Much of that early harvested corn is producing strong yields, which is price-negative for the corn market. But much of that early harvested corn is being taken from areas that were fortunate enough to get planted on time or relatively early this year. Those yields better be strong or there are real problems. Yields will come down as later-planted corn is harvested.

The long and short of it: With harvest underway and early yield results coming in strong, seasonal pressure will make it harder to find buying interest in the corn market.

* Beans ready for another upside push? Soybean futures entered the Aug. 26 gap on the daily charts this week, but bears couldn't get those gaps filled and futures bounced. That suggests the bean market is ready to one last upside push. While traders are reluctant to factor in yield losses for corn, they are much more willing to do so for soybeans. Part of that is due to them being conditioned on the importance of late-season weather on soybean yields. The late-season heat and dryness is not favorable for soybean yields. But it also has to do with the structural fundamental differences between corn and soybeans. While the runup to all-time high prices in corn last summer slashed corn demand, soybean demand was trimmed just modestly by the record prices.

The long and short of it: Because of the stronger demand base, traders are much more willing to respond to crop concerns in soybeans than they are in corn.


Follow me on Twitter: @BGrete

Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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