In my view we’re enjoying a fantastic finish of the growing season for corn and beans and the National Weather Service is calling for slightly warmer and wetter than normal conditions in the Heartland in its 6 to 10 day forecast. The state by state condition reports usually receive less emphasis as crops near harvest in my opinion. The market will be shifting and focusing on harvest activity as crop condition becomes more of a known in the market. The September 12 crop report, according to crop report tour talk from Pro Farmer and other crop scouts should estimate that the corn and bean crops have increased in size from the August figure in some areas. It is difficult to talk about the end of the growing season when it’s over 100 degrees in the Midwest, yet we’re 6 weeks away from normal first frost in the central Midwest and by the end of September, given the early maturity, producers will be welcoming a frost in order to kill the weeds.
As the market slips I continue to get a sense of a potential increase in buying from all market participants. Most should resist the temptation to pick a bottom in price, it’s very difficult to do in my view. It’s been my experience that prudent end users maybe rewarding their patience with scale down pricing and taking extended coverage. Some Commercial Grain entities believe that having 17 weeks coverage is prudent if you’re bearish and taking 40 weeks if you’re bullish. Everyone’s mileage may vary when taking coverage. Basis levels should remain on the defensive as tight storage space is expected to be a factor and this works into widening spreads in my opinion.
It wasn’t that long ago (last week) when wheat/corn was at $2 and above and at those differences wheat was screaming to be seeded in my view. That compulsion is subsiding as corn/wheat approaches $1.50. Currently the spread is trading at 1.70, Chicago wheat over corn. I look for this spread to tighten to 1.50.