Katie Geerdes

Basis Discussion:  Farmers who have held grain expecting seasonal strength to sell into when the planters were running were disappointed this year. April/May is most often when highs are made and this year the seasonal was a bust. Cash markets languished and farmers have borne the cost of carry. It goes back to “short crop/long tail”, that when highs are made at harvest, spring rallies melt. I sold out completely in December and did not even carry any gambling bushels into this year. The market had to further appreciate in order to cover the cost of carry and I did not see that happening. End-users do not have their demand needs covered yet to reach the next harvest so it will be a game of chicken between farmers with grain yet to sell and end-users who need it. Time will run out. Farmers who overstay wrapping up their old crop sales could see that grain devalue to new-crop price levels.  Our local ethanol plant basis is 85 cents over CBOT off July.  They will make another basis adjustment when commercials shift to bid off of September but the cash price may change little. The top end of the range for…

Can drought in June impact corn yields? The number of kernels per row, kernels per ear and even kernel mass is determined very early in the corn plant growth cycle, V2-V12. This sets yield potential. Granted, it is the success of pollination and the fill after pollination that determines the degree of yield potential that is realized. Stress early in plant development thus impacts yield potential while conditions at pollination and thereafter determine how much of that potential is manifested. Perdue notes that: ” Row number is determined strongly by plant genetics and less so by environment. This means that row number for any given hybrid will be quite similar from year to year, regardless of growing conditions. The potential number of kernels per row is complete by at least V15 and maybe as early as V12. Kernel number (ear length) is strongly affected by environmental stresses. This means that potential ear length will vary dramatically from year to year as growing conditions vary. Severe stress can greatly reduce potential kernel number per row. Conversely, excellent growing conditions can encourage unusually high potential kernel numbers.”   Pioneer added, “In general, ear responses to environmental stress factors at specific times of…

Corn/Soybean Recco Update: Let’s take another look at the charts: As noted on the generic Elliot Wave chart we are likely in a 4th wave correction. I mentioned 537 a couple reports ago as a technical target for a rebound in December corn and it proved to be a barrier. We hedged a third of our new crop at 536. It could be jabbed which is why we set additional sales at 542. The chart pattern has also set up as a potential head and shoulders bottom that would project to 581 in December corn. Sell $6 Dec corn calls relative to your risk appetite.  I would expect such a rally to be a spike based on a weather threat. I will change the price target for hedging the last third of expected 2023 corn production from 548 to 576. If, as expected, favorable growing conditions materialize in the latter half of June, then I would expect a major breakdown unto a summer low as the 5th wave decline unfolds.   We are able to count a smaller degree 5-wave decline from the April 3 high in November soybeans (April 18 high basis July) to the recent low. This rally…

The hog market is a disaster and losses may persist before it gets better. There have been strong signs of underlying demand weakness for pork that has appeared to defy an explanation. The Supreme Court ruling to allow California’s Prop 12 ban on pork sales from hog operations that do not comply with California production standards for sow herd treatment adds another ton of bricks to weigh on the market. California represents 15% of US pork consumption so it has an oversized impact on US demand.   I have been writing about our ability to buy Iowa Chops for $1.69 cents lb. here in NW IA. In looking at pork prices around the country, what I have found is that pork here is the cheapest in the nation. I have also been told that pork quality is the best here. For the most part the production and processing centers for the US are in this region so we are logistically best positioned to have the least cost pork. The CBOT River system prices the cheapest corn in the country with basis radiating from the river delivery location.  It is a similar situation for pork here with pork plants in the…

A lot of corn-on-corn has been historically planted where we live in western Iowa. Much of it was the result of livestock producers wishing to produce their own feed. That is still the way that it is in our extended family operation. I have planted corn-on-corn for an extended number of years, most of the time during my 50-year career in farming, very successfully. Our corn yields have been rising in spite of corn-on-corn which can be a drag on yields. Stalk management has a lot to do with it. Years ago, we took care of stalks with fall moldboard plowing. Today stalks are baled for bedding.  Stalk removal is traded for manure. I believe that corn economics is generally more profitable than soybean economics here. Corn yields are more reliable than soybeans. My last run of corn-on-corn was because I could not grow $8-9 soybeans profitably so I grew continuous corn. $13-15 soybeans became competitive with corn-on-corn. If soybean prices fade again then the incentive to grow corn-on-corn will return. I will probably consider it again in 2024.   Corn requires more water to grow than soybeans and one response to the recent La Nina and accompanying drought was…

Poor export performance has been the primary drag on the grain market during its latest slide lower. Corn prices have felt the weight of several Chinese cancellations, soybean demand has stalled out against competition from Brazil, and wheat exports have been underpriced by much cheaper offers out of Russia. One could argue that the export negativity has been fully priced into the market – the recent break from the middle of April to recent lows took $1 out of nearby corn futures, almost $2 off of July soybeans, and about $1.20 away from July Chicago wheat.   RJ O’Brien analyst Randy Mittelstaedt stated in his latest weekly grain export sales recap that, for corn, “it appears more likely the USDA’s just-lowered 1.775 billion bushel export project is still in need of further downward revision.” Total old-crop corn sale commitments are tracking down 36 percent from last year versus the USDA projection for them to drop 28 percent. Mexico and Japan were still shown as strong buyers of U.S. corn in the latest report. Chinese importers have been cancelling recent purchases, not making new ones, but they have also been taking in large shipments of corn bought earlier in the year….

Ukraine President Zelensky has had an extremely productive past several days. After a sweeping tour of Europe picking up $blns in new aid, embracing European heads of state and traveling in donated aircraft, he detoured to the Middle East to scold Arab nations for their support of Russia. Those Arab leaders can see the solidarity of the European coalition of support for Ukraine and economic banishment of Russia from the world community. They will benefit from the loss of Russian production in the global energy markets as Russian production capacity declines as it will long term without western technology. They also get to see firsthand that any Russian military kit that they have is inferior to ours. The Saudis benefit from having US military equipment but then again depend on us to have it serviced and upgraded. Note that there were two Saudis on the latest trip to the International Space Station showing something else that money can buy. Then Zelensky traveled to the G7 summit in Hiroshima Japan in a French Government aircraft landing like a “rock star”. Further economic sanctions were extended on Russia to make it more difficult for them to fund their war. They had found…

One of the reasons that I gave for selling all of my 2022 old crop cash corn last December was that technicals had turned impulsive to the downside. Short crop/long tail also appeared to be in play. I had no faith in their being a spring rally. There were rounding tops in both corn and soybeans and downside momentum progressively picked up as charts rolled over. I have been tracking where I think that these markets are at in the progressive wave counts on the generic Elliot Wave pattern chart below. Note that we have been in the 3rd wave subdivision of the wave-C decline. 3rd waves are typically the most powerful and can display elevator shaft-like price losses while technical oversold readings become temporarily irrelevant. There is little question that we were in a 3rd wave decline with only how much of it, if any, is left to be determined. CBOT markets are essentially deflating which the Fed wants them to do. Things will eventually get cheaper again.   Looking at the larger weekly wave count, the high in July corn was set in May of 2022 at 760 with an A wave decline bottoming at 574 the following…

The latest grain price slide has been a product of various headline shocks – starting with a bearish USDA report and including another Chinese corn export cancellation as well as the announcement of an extension for the Black Sea export deal; however, the selloff turned into something more than fundamentally motivated as it became technically-driven following the break of the lows from earlier in the month and from last summer. The tumble also turned “mechanical” in the sense that stop loss orders were hit to help snowball the move before more liquidation was forced by traders deciding to close out positions rather than margin them. The technical and mechanical nature of the price action will continue to play a key role in where prices go from here, so we will assess the critical chart points alongside consideration of factors like volume and open interest, trader positioning, and seasonality.   As a starting point for forming technical objectives, corn futures should be viewed on a continuous chart that shows a running history of the nearby contracts. The continuous chart now features an open gap where May corn just expired at a wide premium over the July. This expiration gap leaves open…