Grain Marketing Highlights – June 29, 2012

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

U.S. Crop Conditions Continue to Decline
Tomorrow’s reports are important, however, focus on the weather is likely to take precedence over those reports barring any major surprises. For a look at the progression, since mid-May 2012, of what has been termed as a flash drought go to www.droughtmonitor.unl.edu. The animated version of the weather map explains the growing severity of the drought that has taken a grip on large portions of the Corn Belt over the last five to six weeks. So far the forecast has not changed with a decline in conditions likely in next Monday’s report. U.S. crop conditions worsened again in Monday afternoon’s report, go to Google and bring up U.S. Crop Conditions.

 

Pre-Report Planted Acreage and Quarterly Grain Stock Estimates
USDA’s June Planted Acreage and Quarterly Grain Stocks reports will be released Friday June 29. Given below are the pre-report industry average, high, low, March 30 estimates and last year’s final (2011) estimates. On average acreage increases are expected over the March 30 intentions report for new crop 2012 U.S. corn and soybean production. What matters to commodity prices is the size of the increase(s) in acreage and whether any downward revisions are seen, the later possibly being price positive especially with the dry weather being experienced throughout large portions of the Corn Belt.

Pre-report expectations are for quarterly U.S. corn stocks to be less than last year, soybean stocks to be higher, and all U.S. wheat stocks to be lower. Commodity traders will be looking for any possible surprises, deviations from pre-report expectations, that may be revealed in the report?

 

ACREAGE (million acres) USDA

3/30/2012

USDA

Final 2011

6/29/2012 Average High Low
Corn

95.96

96.76

94.30

95.86

91.92

Soybeans

75.58

76.54

74.50

73.90

74.98

All Wheat

56.85

59.34

55.90

55.91

54.41

Spring

12.66

13.48

12.00

11.98

12.39

Durum

2.30

2.45

2.18

2.22

1.37

Grain Sorghum

6.12

6.30

5.98

5.95

5.48

All Cotton

13.00

13.30

12.70

13.20

14.7

QUARTERLY STOCKS (billion bushels)
6/1/2012 Average High Low

3/1/2012

6/1/2011

Corn

3.182

3.500

2.982

6.009

3.670

Soybeans

0.640

0.662

0.595

1.372

0.619

Wheat

0.726

0.748

0.705

1.201

0.862

Grain Sorghum

0.051

0.062

0.040

0.108

0.080

Source: DTN

Marketing Strategy

Rising markets are tricky, especially weather markets. The reason being that weather markets can turn on a dime. So those that can advance sales are wise to do so on an incremental basis. Options can be used but must be used wisely when and if the opportunity is presented. For example, a $6.30 Dec ‘12 corn put has a premium of 52 cents per bushel in this morning’s trade. A decision to purchase the $6.30 put would guarantee a minimum price of $5.78 plus or minus basis. Assuming a 25 over basis for fall delivery equates to a minimum sales price of $6.03 per bushel or better for new crop corn. Duly noted the premium cost in the example is considered to be on the high side. Watching for opportunities to use a put might be worth considering as time passes?

Tomorrow’s reports could weigh in on the bump that we are getting from the weather market as could a change in the forecast. One observation is that open interest is declining as prices have risen? Last year the high price for new crop corn occurred on July 5. Overall we’d look for position squaring in today’s trade ahead of the report. Today’s export sales report as of the week ending June 21 was bearish for U.S. corn, neutral for soybeans, and bearish for wheat. Outside market forces are also currently running negative to commodity prices. Dec ‘12 corn futures are currently trading at $6.36; Nov ‘12 soybean futures at $14.06; and July SRW wheat at $7.23 per bushel.

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

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