CNS Canada — Soybean and corn futures at the Chicago Board of Trade fell to fresh four-year lows during the week ended Wednesday, and there is still plenty of room to the downside as the harvest pressure builds over the next month.
“It will be a long harvest,” said Scott Capinegro, president of Barrington Commodity Brokers in Illinois, adding that “it could get really ugly.” He said large U.S. corn and soybean crops were the main bearish driver in the market.
“We just have too many bushels,” said Capinegro, noting soybean yields were consistently topping expectations while corn was already piling up outside elevators in Kansas.
With prices declining, there is little incentive for farmers to store their grain either, and off the combine sales should build up as the harvest progresses.
Capinegro said short-covering corrections will materialize, but “the rallies will be very shallow.” November soybeans had a downside target of US$8.35 per bushel, he said, while December corn could be headed down to the US$2.85-90 area.
With the path of least resistance pointed lower, it will take a big weather scare in South America to generate any serious bounce at this time.
Going forward, low prices will be needed to spur demand and hopefully curtail world production, Capinegro said, noting “the pain will get worse, before it gets better.”
He estimated over 70 per cent of farmers hadn’t presold their soybeans or corn, as they were banking on a weather rally over the summer. That rally never took place as crop conditions remained near-ideal, and now there is a great deal of grain that will need to be priced.
Better opportunities were available earlier in the year, but current prices are below the cost of production in many cases. While farmers are understandably upset to be losing money with bumper crops, Capinegro pointed out “the market doesn’t care what the cost of production is.”
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.