Grain Marketing Highlights – August 17, 2012

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

World Production Declines Bolster Commodity Prices
During the first of the week corn and soybean prices slackened off due to the lack of fresh news concerning new crop corn and soybeans. The Weekly Crop Progress report lowered U.S. corn crop conditions in the fair category by one point and increased corn rated as very poor by one point. Soybeans rated poor dropped one point. Soybeans rated good were increased one point above last week’s ratings. Weekly export sales for the week ending August 9 were reported to be bearish for both corn and soybeans.

Commodity traders appear to be waiting for harvest to progress to see if USDA’s August production estimates will hold true or eventually be lowered. By Wednesday commodity futures were bidding up due to production concerns for corn in China and the EU buoyed by a weakening U.S. dollar.

Marketing Strategy
These markets continue to be extremely volatile. Declines in U.S. production estimates could still occur impacting the supply of corn going into the ‘12/‘13 marketing year. Simultaneously, demand (use) can be cut further, hopefully rationed by the markets rather than government intervention. In USDA’s August 10 supply and demand report USDA slashed projected supply for the ‘12/‘13 marketing year by a total of 2.028 billion bushels from their July estimate. Total use was reduced by 1.495 billion bushels from July. Ending stocks were cut by 533 million bushels from the previous month. The same hold true for U.S. soybeans. USDA reduced the projection for total U.S. soybean supply by 378 million bushels. Projected use was reduced 363 million bushels. Ending stocks were reduced by 15 million bushels from July estimates. With the near pipeline ending stocks estimates for the ‘12/‘13 marketing year it becomes obvious that further cuts in demand will be necessary if yields do not achieve the August 10 estimates. This week’s U.S. Drought Monitor does not indicate any improvement in weather conditions in the Corn Belt (http://droughtmonitor.unl.edu/).

Although new crop corn and soybean prices are currently trading lower than their recent highs one has to consider that harvest sales still make sense. Both new crop corn and soybean futures contracts are inverted indicating that there is no carry in these markets at the present time. From the December ‘12 new crop corn futures contract to the July ‘13 contract, the corn market is inverted by 20 cents per bushel. It has been suggested that getting needed corn supply has alternatives in the world market, albeit not as good as earlier projections indicated. From the November ‘12 new crop soybean futures contract to the July ‘13 contract, the soybean market is inverted by almost $2.00 per bushel. This means that commercial traders believe that the U.S. could run out of soybeans before the 2013 crop is harvested. This all portends to these markets remaining extremely volatile well into the 2013 cropping season. At the present time there are no definitive answers to making sales decisions. Nothing can be considered as normal. The August supply and demand estimates are subject to change when USDA’s September 12 supply and demand report rolls around, as were the June and July projections.

Dec ‘12 corn futures achieved a life-of-contract high on August 10 at $8.49 per bushel. Nov ‘12 futures prices achieved a life-of-contract high at $16.91 per bushel on July 20 and again on July. Currently, Dec ‘12 corn futures are $8.08; and Nov ‘12 soybean futures are $16.28 per bushel.

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

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