Grain Marketing Highlights – September 23, 2011

Outside Market Forces Burden Commodity Markets

Corn Analysis
U.S. corn stocks are tight and they are expected to remain that way going into the 2012 growing season. Meanwhile, 2011 U.S. corn and soybean harvest is underway with mixed results being reported. This will not be a bumper crop year for U.S. corn, although with an estimated 92.3 million acres planted and a yield of 148.1 bushels per acre it could turn out to be the third largest crop on record. The question remains as to what will happen to the corn production estimate in the October and ensuing USDA reports? The estimated acres harvested could be revised, likely down, and the yield estimate could be changed, up or down. Those pending adjustments could cause corn prices to move higher or lower.

As outside markets collapse and the dollar rallies, investors are weighing in as to how they feel about the Fed’s latest move to bolster the economy. As they ponder that question, the commodity markets are becoming oversold. With the short-term and long-term trends down in corn the path of least resistance continues to be lower. The weekly export sales report for corn, released this morning, was bearish. However, reports of strong purchases from South Korea this week of over 400,000 MT due to lower prices, and continued rumors of Chinese interest should allow support from both sides of the market (commercial and noncommercial) to emerge some point soon. Since last week’s writing, Dec ‘11 corn futures have declined nearly 60 cents per bushel.

Soybean Analysis
It will be all about noncommercial long-liquidation today as outside markets collapse and the dollar trades well over one point higher tied to growing concern over global economies. Wednesday saw the nearby November soybean futures contract close at its lowest level since June on the continuous weekly chart setting up further downside potential. While the weekly export sales report was reported to be bearish for soybeans, it is notable that a steady stream of announced sales continues to China with another 180,000 MT reported this morning. Nov ‘11 soybean futures have declined 95 cents per bushel since last week.

Wheat Analysis
Spillover pressure continues to come from the collapse in row-crops and the higher trending U.S. dollar index. Export sales and shipments were bullish as both numbers, reported sales and shipments, came in above the amounts needed to stay on pace with USDA’s 1.025 billion bushel demand projection. However, if the dollar remains on the upswing, U.S. exports could suffer the balance of the 2011-2012 marketing year. July ‘12 SRW wheat futures have declined 33 cents per bushel since last Thursday.

Market Strategy
Commodity markets this past week were ruled by panic and mayhem. The Dow has been on a slippery slope downward since the markets learned of the Fed’s recent move, losing nearly 800 points. Simply stated, the markets do not like the Fed’s latest move. Hopefully, once the move is digested the commodity markets can respond to the oversold situation and return to seeking appropriate equilibrium prices. Any comeback in commodity prices will be dictated by the extent of the demand reduction that is taking place both at home and abroad. The September 30 Grain Stocks in all Positions report will give an indication as to the extent of the demand reduction.

Due to the tight U.S. corn supply, corn prices are expected to remain firm going into the ‘12/‘13 marketing year. Domestically, the stocks-to-use ratio for U.S. corn is now calculated at 5.3%, as compared to 5.4% in August and 6.9% last year. For the world, the stocks-to-use ratio for corn was estimated at 13.6% in September, 13.2% in August, and 14.7% last year. The domestic soybean stocks-to-use ratio is similar 5.2% for September, 4.9% in August, and 6.9% for the ‘10/‘11 marketing year. World stocks-to-use estimates for soybeans were reported at 23.9% in September, 23.2% in August, and 27.2% last marketing year.

The heavy sell-off this past week is being attributed to the faltering U.S. and global economies. Commodity prices are expected to stabilize once the markets digest the Fed’s recent actions and buyers begin to take advantage of lower commodity prices as buying opportunities. Considering the size of the sell-off this past week, it might make sense to hold up on advancing new crop corn and soybean sales at this point in time. Currently, Dec ‘11 corn futures are trading at $6.64; Nov ‘11 soybean futures at $12.93; and July ‘12 SRW wheat at $7.27 per bushel.

For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.

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