Once the crop dried down, harvest progress is seeing at a rapid pace for most areas of the Midwest. Price pressure started the week, but then soybeans saw a rebound Thursday, with some analysts attributing it to both export sales and option expiration.
63% of the U.S. soybean crop has already been harvested, which is ahead of average. Corn harvest has been a little slower, sitting at 45%. Many farmers across the Midwest and West have had few rain delays this year, and harvest exhaustion is underway.
“I think the biggest change is that we’ve had such a beautiful harvest,” says Bob Utterback of Utterback Marketing. “Guys are actually saying, ‘I’m actually tired, and I want to take a break,’ but the harvest is great except for combines breaking down a little too much. But the crop is coming out quickly.”
As farmers continue to harvest the 2022 crop, the lack of rain hasn’t been the only surprise this harvest. Surprising yields are also a story for some areas.
“The yields I think are surprisingly better than what we thought,” says Utterback. “And that’s I think was why the market was weak first part of the week, because it is October, and this is a time to seasonal lows. But I would argue that once we get past harvest, maybe 75 80% done, the bin doors start to shut, and we’ll bounce back up relatively quickly. but then we’ll be back to the same old problem. The question is if demand going to be strong enough to push the market any higher.”
Utterback thinks the U.S. will get into a period of sideways trading until new fundamentals enter the market, like South American crop conditions.
Weekly export sales on Thursday was the one bit of news that did seem to move the markets this week. Joe Vaclavik of Standard Grain says the export sales for soybeans was a positive factor that fueled soybeans to see double-digit gains on Thursday.
“The other thing that could have driven the soybean market is option expiration,” says Vaclavik. “A lot of times before a big option expiration like this November option expiration that happened on Friday, you’ll see the market revert to or gravitate towards one of these big round numbers,” adds Vaclavik. “We saw a little bit of that with the $14 strike price, and that big round number, so, definitely some positive.”
He says short-term, he thinks the choppy market action could continue. He says the markets haven’t been able to get excited due to the lack of news compared to what the market saw the past few months.
What’s Going On with Basis?
Basis is seeing a sudden change in areas. Rail delays and low river levels are causing a logistical nightmares. As a result, grain elevators are full with large delays in shipping grain out.
“The difference in like crop production in say, parts of Illinois versus say parts of the western Corn Belt, the huge difference there in parts of Illinois, they had record corn and soybean yields in the western Corn Belt, it’s a disaster in some areas,” says Vaclavik. “So, that’s going to affect basis. There’s going to be a big difference from the good places to the bad places. The river issue is the other thing that’s really obvious. I think that’s had a big time negative impact on bases in some areas, especially in regard to soybeans, exports represent a much larger portion of our demand base for soybeans, it’s like half the demand base, were in corn, it’s only like 15%, give or take. So, I think it’s had a bigger impact on the soybean market and soybean cash prices, basis bids, especially if you’re near the river and you’ve got river delivery locations. That’s where it’s been the worst.”
What should a farmer’s plan be if they’re in an area that’s experiencing the headaches with moving grain? Uttberack says he knows it’s a difficult decision.
“Coming into August, September, I was proposing that you guys should dump it off the combine because the market was given some premium bids. Now with the basis starting to decline, farmers are getting less excited about moving the product. There’s limited carry in the market but it’s getting to a really difficult decision because the basis has dropped some for a lot of guys, so grain is going to go in the bin and sit there until November or December for a lot of guys, then they’re going to evaluate the landscape and decide if they want to move it. I still think if you have a very limited carrying charge market and a good basis in that December time period, I would be ready to dump the inventory and put on a limited option play, keeping your risk on paper, rather than storing for six months hoping for that summer weather scare.”
Utterback says big corn basis in the Midwest means some farmers saw $1.50 to $1.80 over, and if farmers think that could happen again, then they may be less willing to sell.
“I think it’s gonna motivate a lot of people to store a lot of corn all the way to next July or August and if we don’t have a weather problems, they’re gonna get cut back to a normal seasonal basis behavior that could be quite disarming for them,” Utterback adds.
