Carl German, Extension Crops Marketing Specialist; email@example.com
Drought Continues to Reduce U.S. Crop Prospects
USDA will release their July Supply and Demand report on Wednesday, July 11. The report will publish the usual pre-report industry and USDA’s ‘official’ crop yield estimates. It will be very difficult to establish estimates that turn out to be accurate depending to a large degree on whether the drought continues to linger. A review of the U.S. drought monitor this morning seems to indicate that the drought continues to worsen across the country now encompassing almost the entire area of the Midwest Corn Belt, the Southeast, Southwest, as well as the Mid-Atlantic regions http://droughtmonitor.unl.edu/. The weather pattern remains hot and dry in the near term, but the long-term forecast is showing some hints of better weather eight to 12 days out. Crop conditions released on Monday afternoon dropped another 8 percent with 48% of the nation’s corn crop now rated as good to excellent, and another 25% of the crop rated as poor to very poor. A quarter of the crop was noted as silking, well ahead of average. Crop conditions have now dropped nearly 30% in six weeks.
The impact of the drought is being reflected in soaring commodity prices with new crop corn reaching a new life-of-contract high at $7.08 per bushel in yesterday’s trade. There is an old adage in commodity trading “the bulls sometimes profit, the bears sometimes profit, but the hogs always get slaughtered”. Current crop conditions would suggest that the bulls are not happy because even though they waited on higher prices, they likely have little to no crop to sell unless it is irrigated or sitting in a production area receiving timely rains. The bears are not happy because they’ve sold early and at lower prices with the likelihood of no remaining crop to sell. Meanwhile, the hogs have no crop sold and no crop to sell. Obviously, the current situation is no laughing matter concerning anyone – bulls, bears, or hogs.
The corn market softened overnight due to a rumor circulating that EPA could cut the ethanol mandate by 20 percent (Source: DTN). Even so overall current conditions suggest that advancing new crop sales should be placed on hold. We will need to see the production estimates in next Wednesday’s report before considering further sales decisions for the current and/or next marketing year. New crop Dec ‘12 corn futures are currently trading at $6.95; Nov ‘12 soybeans at $15.08; with July SRW wheat at $8.00 per bushel. Dec ‘13 corn futures are trading at $6.07; Nov ‘13 soybeans at $13.00; with July ‘13 SRW wheat futures at $8.26 per bushel.
For technical assistance in making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.