Grains Under Selling Pressure Despite Bullish Weather

From Bruce Knorr of Farm Futures Magazine in an email to me this morning:

Look for another day of selling on the open this morning, with the futures market torn between conflicting weather news and outside markets that are again under selling pressure.

Here's more:

Dry, hot weather is impacting condition of the corn crop. According to USDA meteorologist Brad Rippey 45% of this year's crop has been dented as of Aug. 31, which is well behind the five-year average of 65%.

"That is something to watch as we head deeper into September and worry about the threat of an early freeze," Rippey says. "We do only have 14% having reached the dent stage in North Dakota; the five-year average is 47%. Only 24% dented in Minnesota; the five-year average 59%."

The dry weather pattern is also affecting soybean conditions, particularly in the northern states.

"We do see in Michigan and Wisconsin now 29% of the soybeans rated very poor to poor," Rippey says. "We've seen some increases in other states as well including Indiana at 18% and Ohio at 23% very poor to poor."

Although the dry weather is causing concern for the corn and soybean crop, it has allowed for nearly all spring wheat across the Northern Plains to be harvested.

The point of this is that while grains are being sold heavily, the grain crop itself is under severe stress. One reason for this is that the cold, wet Spring of '08 delayed planting for weeks in May and June, so now, the crop is well behind normal in its development. An early Fall and cool weather could significantly reduce the grain harvest. This is an increasingly likely scenario as September progresses, unless the crop develops to harvestable condition very quickly. We are in a race against time! Will the crop finish its development and be harvested before cold weather sets in?

While wheat, soybean, and corn prices are all near limit down today, the crop is showing signs of damage and crop yields are increasingly likely to be negatively affected. This will likely eventually prove very bullish for prices, especially if early freezes occur in the Midwest grain-growing regions. An Indian summer would help to relieve this stress. However, some regions of the upper Midwest have already seen night-time temperatures in the 30's.

Because of the crop stress, analysts keep predicting higher prices, but prices keep dropping instead, probably due to fund-related selling of commodities across the board. Why don't the news media ever accuse speculators of driving prices too low? When the weather fundamentals regain ground and their influence over the grain markets, grain prices may rise in a parabolic pattern. I will be watching this development very closely over the next few weeks during the harvest period of the growing cycle, because this could be setting up a tremendous opportunity to buy grain futures sometime this Fall. If cold weather begins to damage the crop, we could see a new bull run in grains that would overpower even the strong Dollar fundamentals! The next few weeks should prove very exciting and interesting!