Grain Marketing Highlights

Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu

May Supply/Demand Highlights
USDA released the official May supply/demand estimates this morning. Just how the numbers line up for this time of year (below, above, or at pre-report expectations) on the high order of things really is not that important particularly for the row crops. The row crops have a way to go before we can start counting our chickens (bushels produced). The big question remains: can U.S. corn planting be completed on time? As of Monday of this week the 18 states that planted 91% of last year’s corn crop were 27% planted vs. 10% the week before, 45% for the same week last year, and 59% for the 5-year average. Needless to say, it is getting late. However, reams of copy will be written about this subject over the next month or so. Fact of the matter is: first, the corn crop has got to go into the ground. Second, we are likely to need a long growing season in order to stand a chance of making trend line yield. Third, trend line yield will be difficult to achieve in the event any further weather issues arise. Lastly, the scenario concerning the size of this year’s corn and soybean crops will take the next several months to develop. Therefore, this morning’s supply and demand estimates for the row crops really don’t mean much at this point in time. However, wheat is another story.

Wheat Analysis
The case of wheat is a different story. Winter wheat production is projected to increase from last year, up 26 million bushels. All wheat production for ’08/’09 is projected at 2.4 billion bushels, up 16 percent from a year ago. Hard red winter wheat production is estimated at 1.011 billion bushels, up 5 percent from a year ago. Soft red winter wheat production, projected at 551 million bushels is projected to be 53.9 percent larger than a year ago. It is fair to say that wheat prices are likely to decline further from their current levels, at least through harvest.

Ending stocks for U.S. wheat were reduced slightly from last month and are now projected at 239 million bushels for the current marketing year. U.S. wheat ending stocks for the ’08/’09 marketing year are projected to slightly more than double, now projected at 483 million bushels. World ending stocks are projected to increase by nearly 12 million metric tons in the ’08/’09 marketing year, now placed at 123.99 mmt as compared to 112.48 for the ’07/08 marketing year. Australian wheat production is expected to nearly double from last year’s drought reduced crop, now estimated at 24 mmt (13.1 mmt last year). Canadian wheat production is projected to increase by 5 mmt over last year, projected at 25 mmt. July CBOT soft red winter wheat futures are currently trading at $8.00 per bushel (down 22 cents per bushel from yesterday’s close).

Corn Analysis
Ending stocks for U.S. corn for the current marketing year are projected at 1.383 billion bushels, 100 million bushels more than last month and 79 million bushels less than the carry in from the ’06/’07 marketing year. For next year (’08/’09) the carry is projected to be cut almost in half at 763 million bushels. World ending stocks for corn were reduced slightly from last month, now projected at 99.03 mmt. Argentine and Brazilian corn production are projected to increase 6 mmt above last year’s production, for a combined total production of 80.5 mmt. Dec ’08 corn futures are currently trading at $6.46 per bushel with the high at $6.54 per bushel on the day. Good, bad, or indifferent corn prices can and will explode even higher if planting progress lags into yield reducing territory on the calendar, the primary date being May 30th.

Soybean Analysis
Ending stocks for U.S. soybeans were reduced 15 million bushels from last month’s estimates and are now projected at 145 million bushels. Ending stocks for the ’08/’09 marketing year are projected to increase by 40 million bushels, estimated at 185 million bushels. In April, USDA reported that Brazil and Argentina are projected to produce a combined total of 108 mmt of soybeans. World ending stocks of soybeans were reported at 49.31 mmt. Nov ’08 soybean futures are currently trading at $12.81 per bushel, up 35 cents from yesterday’s close.

Marketing Strategy
Crude oil is currently at $124.80 per barrel, a new high. The U.S. dollar index is now trading at 73.315, within 2 points of the trading range the dollar has been in since March ’08. ’08 wheat that one does not have a home for should be booked soon. In the case of corn, it is getting near the time to consider the purchase of put options in order to establish a minimum price and still be in the game in the event that prices move higher. Timing is the key. One needs to wait and see if and when the ’08 corn crop gets planted. Those that have not done any soybean sales need to consider the possibility of more soybean acres getting planted than indicated on March 31st due to the possible shift from corn to soybeans due to wet conditions. For technical assistance on grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.

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