Carl German, Extension Crops Marketing Specialist; firstname.lastname@example.org
Crop Size Projections Expected to Decline
With 48% of the nation’s corn and 37% of the soybean crop rated poor to very poor, 2012 crop production forecasts will be dropping in next week’s release of the August 10 monthly supply and demand report. Just how much drop in the crop production forecast that will occur is anybody’s guess at this point in time. So far preliminary estimates for U.S. corn production range from 120 to 130 (+ or –) bushels per acre for corn with the lowest estimate for soybeans around 34 (+ or –) bushels per acre. The August report will project a short crop for both U.S. corn and soybean production, meaning projected use will exceed production and stocks will be drawn down.
Most of the focus recently has been on the short crop (supply side of the equation) that the U.S. is expected to harvest, which happens to be getting underway as of this writing. That would preclude an expectation of even higher prices yet to come. However, it is important to bear in mind the demand side of the equation too. Reducing crop size is dictating the necessity to make even larger cuts in domestic demand, i.e., exports, feed use, ethanol production, etc. That realization appears to be causing the non-commercials to be taking a breather. Speculators are said to be protecting profits and losing their appetite for the extreme volatility these markets are currently experiencing. In today’s trade the nearby and new crop corn, soybean, and wheat futures prices posted double digit declines across the board.
Sharp demand reductions are now occurring, with some of those cuts perceived to be demand destruction. It will take a long time to get some of the lost demand back. Beef, dairy, and hog producers are cutting production due to the drought and high feed costs. Much of that demand will take some time to regain because of the production cycle to bring a heifer into milk production or a steer to market. U.S. export demand is being reduced while imports are picking up. The problem is, imported corn from South America or anywhere else in the world will barely make a dent in U.S. needs.
After reaching a record high of $8.20 per bushel earlier this week, new crop Dec ‘12 corn futures were posted at $7.91 per bushel near the close of day trade; Nov ‘12 soybeans at $16.12; and Dec ‘12 SRW wheat at $8.81 per bushel (August 1, 1:47 p.m. CDT). New crop Nov ‘12 soybean futures recorded a high of $16.91 on July 23rd with the high for Dec ‘12 SRW recorded at $9.48 per bushel on July 20th. July ‘13 SRW wheat futures are currently posting at $8.30 per bushel after reaching a recent high of $8.44 on July 5.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.