Grain Spreads: Harvest Catch Up

Sean Lusk General Commentary Leave a Comment

Crop progress numbers released this afternoon showed corn at 66 percent harvested, approximately 20 points behind the 5 year average. The delays are mostly in the Northern plains and Great lakes regions. Major laggards on harvest progress include North Dakota at 15, South Dakota at 39, Wisconsin at 30, Michigan at 33, Minnesota at 63, Iowa at 64, and Illinois at 71. Some of the delay can be attributed for the race to get beans out of the field first. Harvest progress on beans at 85 percent for the national average. For Corn, weather events in the North are posing problems as snow packs have developed in many areas followed by freezing rain, snow and sub zero overnight temperatures. Continued moisture in these areas along with any kind of thaw the next two weeks will be monitored. Corn got a bounce today of 4 cents and is stubbornly holding support at 372 basis Dec 19 futures and 381 in March 20 futures. These are key areas of support. Should they hold, I look for funds to cover some of their 120 K short. To prod them to cover and go long would probably entail a few factors to enter into the market. Basis levels rising for corn in the North due to the harvest delays would be the immediate factor. A close second would be a continuation of a wetter pattern of rain /snow that hampers and delays any progress in the North. Further out weather issues in South America and or an influx of demand would in my view establish a floor for price into Thanksgiving and Month end. Watch those support levels. If one is looking to be long , look no further than buying the Feb corn 4.00 call for 5 cents. Late January expiration. If any bullish inputs emerge, this option is a good value play in my view.

Producers are almost caught up on bean harvest. We are at 85 percent harvested. The five year average is at 92 and last year we were at 87 at this point. The USDA on Friday didn’t adjust production or yield for beans from the October report, which to me is an impossibility. We won’t know until the January report. Perhaps we will get an accurate accounting by then. They did adjust the crush number lower which raised ending stocks to 475 from 460 last month. Simply there is nothing for the bulls to grab since Fridays report, and today’s trade was more of a snooze and anything but volatile. Jan beans had a five cent range and finished unchanged at 917. Key moving averages sit at 919.4 (200 day) and 922 (50 day). The 100 is at 913. A close is needed above 922 to turn back up. A further pullback pushes the market to 898 in my opinion. I look for an increase in volatility for the remainder of the week, as today’s five cent range is the exception not the norm.

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