Posts Tagged ‘grain marketing’

Grain Marketing Highlights – September 21, 2012

Friday, September 21st, 2012

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

Grain and Oilseeds Rally After Sharp Sell-Off
Grain and oilseed futures contracts continued to decline sharply during Monday’s session. However, commercial and non-commercial buying interest picked up in Tuesday’s overnight session, with a modest rally continuing through Wednesday’s day trade. The recent sell-off dropped near-by new crop corn and soybean futures prices by about $1.00 (+ or -) per bushel since their respective life-of-contract highs were hit on August 10 and September 4. Reasons given for the sell-off are attributed to corn and soybeans being over bought resulting in short covering on the part of non-commercials; new supplies coming on due to ‘harvest pressure’; and a lack of “fresh” news. The good news is that there may be reason to believe that the rally could push prices somewhat higher. Recent Fed action to invest $40 billion a month to buy mortgage backed securities is weakening the value of the dollar which should help U.S. exports. Time will tell regarding investor preferences for either the stock (equities) or commodity markets. Nevertheless, the Fed action was viewed as positive for both markets in the near term. Market volatility remains elevated as a result of the uncertainty in world geopolitics. There too remains uncertainty concerning the eventual impact on the overall economy from QE3.

Other price supporting factors that keep being mentioned by commodity news sources include: dry weather concerns in the Southwestern U.S. which could slow winter wheat planting; dry weather concerns for the Southern Hemisphere which could impact 2013 South American production potential; dry weather concerns in Australia and other wheat producing regions around the world; and China’s appetite for importing more U.S. soybeans. These concerns are currently helping to support the soybean, wheat, and corn futures markets.

Market Strategy
Although one attempts to shed light on expected price direction computer trading seems to be the order of the day. Computer trading is most likely the reason for today’s double digit gains across the board. When price algorithms are hit the computer programs tell the non-commercials (speculators) when to place buy or sell orders. The algorithms are driven by technical indicators. One might surmise then that the trick to determining whether one wants to hold or advance sell orders becomes a matter of following the money. However, it is often stated that eventually fundamentals will take precedence in determining price direction. The only thing known for sure at this point in time, fundamentally, is that the U.S. is harvesting short 2012 corn and soybean crops. The extent of the shortfall won’t be fully known until this year’s U.S. crop is harvested. In the meantime, the corn and wheat markets continue to depict no carry in the forward contract months with SRW wheat futures depicting only a 10 cent carry through the May ‘13 contract before becoming inverted. USDA’s next monthly Supply/Demand report will be released on Thursday, October 11.

The U.S. 2012 corn harvest is expected to hit the 50% mark in next Monday’s crop progress report with soybean harvest to be in the mid-twenties. Weekly U.S. corn and wheat export inspections were viewed as bullish. Soybean export inspections were bearish. The weekly export sales report will be issued by USDA tomorrow (Thursday) morning, September 19. Currently, the day trade closing futures prices for Wednesday afternoon September 18 were: Dec ‘12 corn futures $7.53; Nov ‘12 soybeans $16.70; and July ‘13 SRW wheat futures $8.60 per bushel.

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

Grain Marketing Highlights – September 14, 2012

Friday, September 14th, 2012

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

USDA’s September 12 U.S. and World Supply and Demand Highlights
Trader reaction to the September report was apparently negative for the corn and soybean  markets with corn and wheat futures trading lower as of 1 p.m., Wednesday, September 12. Soybean futures were surging higher. Trader attention in the ensuing weeks will turn to the status of the 2012 crop harvest with both the U.S. corn and soybean 2012 average yield estimates being revised downward (.6 and .8 bushels per acre). There were no changes made in planted or harvested acreage estimates across the board.

Brazilian and Argentine corn production estimates for the ‘12/‘13 marketing year were unchanged from last month for a combined total of 98 MMT (million metric tons). Argentine corn production for the ‘11/‘12 marketing year was unchanged at 21 MMT. The estimate for Brazilian ‘11/‘12 marketing year corn was reduced slightly from 72.8 to 72.7 MMT.

Projected Brazilian and Argentine soybean production was unchanged from last month for the ‘12/‘13 marketing year for a combined total of 136 MMT, a projected increase of 28.5 MMT from the drought stressed ‘11/‘12 Southern Hemisphere crop. Argentine soybean production for the ‘11/‘12 marketing year was left unchanged at 41 MMT while Brazilian production was revised upward from 65.6 to 66.5 MMT, for a combined total of 107.5 MMT.

U.S. S&D Summary, 9/12/12, Million Bushels

 

Corn

Soybeans

Wheat

Crop Year

11-12

12-13

12-13

11-12

12-13

12-13

11-12

12-13

12-13

Report Date

09/12

08/10

09/12

09/12

08/10

09/12

09/12

08/10

09/12

Carryin

1,128

1,021

1,181

215

145

130

862

743

743

Production

12,358

10,779

10,727

3,056

2,692

2,634

1,999

2,268

2,268

Imports

25

75

75

16

20

20

112

130

130

Tot Supply

13,511

11,875

11,983

3,287

2,857

2,785

2,974

3,141

3,141

 

Feed

4,400

4,075

4,150

163

220

220

Crush/Mill*

1,360

1,320

1,320

1,705

1,515

1,500

941

950

950

Ethanol Prod

5,000

4,500

4,500

Seed/Other

30

30

30

101

116

114

77

73

73

Exports

1,540

1,300

1,250

1,360

1,110

1,055

1,050

1,200

1,200

Total Use

12,330

11,225

11,250

3,157

2,742

2,670

2,231

2,443

2,443

Carryout

1,181

650

733

130

115

115

743

698

698

Stocks/Use Rate

9.6%

5.8%

6.5%

4.1%

4.2%

4.3%

33.3%

28.6%

28.6%

Avg Price

$6.25

$8.20

$7.90

$12.45

$16.00

$16.00

$7.24

$8.30

$8.10

*Excludes corn for ethanol

● Projected corn ending stocks for the ‘12/‘13 marketing year were increased by 83 million bushels from last month (650 to 733 million bushels), largely attributed to reductions in demand/use categories for the ‘11/‘12 and ‘12/‘13 marketing years.

● Ending stocks-to-use estimates for ‘12/‘13 marketing year corn increased from 5.8% last month to 6.5% in the September report.

● Ending stocks for U.S. soybeans were essentially unchanged from last month at 4.3%.

● Ending stocks for all U.S. wheat and stocks-to-use were left unchanged at 698 million bushels and 28.6%, respectively.

● USDA’s projection for the season average price for U.S. corn was reduced from $8.20 to $7.90 per bushel (ranging from a low of $7.20 to a high of $8.60 per bushel).

● The season average price for U.S. soybeans was unchanged from last month at $16.00 per bushel (ranging from $15.00 to $17.00 per bushel).

● The season average price for all U.S. wheat was lowered 20 cents to $8.10 per bushel (ranging from $7.50 to $8.70 per bushel).

World S& D Summary, 8/10/12, Million Metric Tons

 

Corn

Soybeans

Wheat

Crop Year

11-12

12-13

12-13

11-12

12-13

12-13

11-12

12-13

12-13

Report Date

09/12

08/10

09/12

09/12

08/10

09/12

09/12

08/10

09/12

Carryin

876.68

849.01

841.06

237.09

260.46

258.13

695.04

662.83

658.73

Production

1004.20

984.98

980.66

307.35

312.40

311.78

892.99

860.42

857.37

Total Supply

 

504.47

508.74

508.84

144.80

134.09

132.09

Feed

225.43

227.03

226.91

Crush

360.19

352.90

347.86

29.03

29.89

29.82

549.55

549.16

548.57

Other

864.66

861.64

856.70

254.46

256.92

256.73

694.35

683.25

680.66

Total Use

 

139.60

123.33

123.95

53.65

53.38

53.10

198.64

177.17

176.71

End Carryout

16.1%

14.3%

14.5%

21.1%

20.8%

20.7%

28.6%

25.9%

26.0%

Stocks/Use Rat

876.68

849.01

841.06

237.09

260.46

258.13

695.04

662.83

658.73

● Projected world ending stock estimates for corn were increased from 123.33 last month to 123.95 (+.62) MMT in the September report for the ‘11/‘12 marketing year.

● World ending stock estimates were also increased by 3.63 MMT for the ‘11/‘12 marketing year corn.

● World ending stocks for ‘12/‘13 marketing year soybeans were reduced slightly from last month.

● World ending stocks for ‘11/‘12 marketing year soybeans were increased from last month’s estimates by 1.71 MMT.

● World ending stock projections for all wheat for the ‘12/‘13 marketing year were reduced .46 MMT.

● World ending stock estimates for all wheat for the ‘11/‘12 marketing year were increased by 1.05 MMT.

● World stocks-to-use projections for the ‘12/‘13 marketing year were increased slightly for corn, reduced slightly for soybeans, and increased slightly for wheat.

Market Strategy
Advancing new crop harvest sales for 2012 corn and soybeans continues to make sense considering price level and the lack of carry being reflected in these markets. The July ‘13 SRW wheat futures contract is currently bidding within 11 cents per bushel of the life-of-contract high. Currently, in e-trade Dec ‘12 corn futures are $7.71; Nov ‘12 soybeans are $17.48; and July ‘13 SRW wheat futures are bidding at $8.64 per bushel.

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

Grain Marketing Highlights – September 7, 2012

Friday, September 7th, 2012

Short Term Downtrend in Commodity Prices Expected
Even though the long term outlook for corn, soybeans, and wheat remains bullish a short term price break appears to be developing. There are several reasons to believe this scenario. First, the early 2012 harvest has begun in the U.S. Short crop or not the harvest period has a tendency to pull commodity prices down in the near term. Second, corn and soybean futures contracts (nearby contract months compared to the distant months) remain inverted albeit at a reduced difference compared to a couple of weeks ago. Second, the highs appear to be getting lower. Dec ‘12 corn futures topped at $8.49 per bushel on August 10, hit a high of $8.06 per bushel in Wednesday’s trade and are currently posted at $7.94 per bushel. Nov ‘12 soybean futures topped at $17.89 on September 4, hit a high of $17.69 on Wednesday and are currently posted at $17.42 per bushel. The weakening of the inverted spreads may well be a signal that the markets are due for a correction. Third, a record large long-futures position held by noncommercial traders in soybean futures is expected to result in profit taking, while stepping to the sidelines with the intention of coming back at a lower price. In other words, Dec ‘12 corn futures could be working toward a test of support in the vicinity of $7.86 per bushel. Nov ’12 soybean futures could be looking to test support in the $15.70 to $15.65 area. (Source: DTN)

Fundamentally, these markets remain long term bullish. The futures market is expected to remain in a sideways to down trend for the remainder of this week going into the September 12th USDA Supply and Demand report. The impact of the September report may turn out to be significant in so far as we have seen a reduction in U.S. corn exports falling about 54 million bushels shy of reaching USDA’s 1.55 billion bushel projection. However, yield reports on the first 10% of the U.S. corn harvest have been disappointing with the idea forming that 2012 U.S. corn production may be hard pressed to achieve USDA’s August forecast of 123.4 bushels per acre.

U.S. soybeans managed to top USDA’s ‘11/‘12 marketing year export market projection of 1.35 billion bushels by 15.5 million bushels. Rumors are circulating that dry weather in the Southern Hemisphere may hamper South America’s crop development beginning with delayed plantings.

U.S. wheat exports are on pace with USDA’s projection of 1.2 billion bushels, although inspections for shipment are running roughly 15% behind schedule. On August 10 July ‘13 SRW wheat futures hit a high of $8.68 per bushel and are currently posted at $8.60 per bushel. Continued dry weather in the Southern Plains with the date for fall wheat plantings rapidly approaching is having an impact on 2013 wheat futures prices. Hopefully, we will be able to get a better handle on world wheat production projections in USDA’s September report.

Market Strategy
Fundamentally the markets remain long term bullish. However, we can expect a short term downtrend in Dec ‘12 corn and Nov ‘12 soybean futures due to the need for the bull to be fed with new news. U.S. and world supplies for corn and soybeans will be tight going into the 2013 cropping season. Making sales for next year’s intended production of corn and soybeans should be considered on a very limited basis. Taking an initial forward cash sale for 2013 SRW wheat based upon the July ‘13 futures contract recently making a new life-of- contract high should be considered. It might not be a bad idea to cover the downside price risk of any new crop (2012) corn or soybeans held in storage for sale at a later date.

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

Grain Marketing Highlights – August 31, 2012

Friday, August 31st, 2012

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

Pro Farmer Tour Pegs 2012 U.S. Corn and Soybean Production Estimates Below August Projections
The Pro Farmer Crop Tour has gained notoriety over the years conducting an annual tour of potential U.S. corn and soybean production in mid-August each year. On Friday, August 24 Pro Farmer released their 2012 U.S. corn and soybean production estimates. The U.S. corn crop was estimated at 10.478 billion bushels with an average yield of 120.25 bushels per acre. The soybean crop was estimated at 2.6 billion bushels at an average yield of 34.8 bushels per acre. Both estimates were below USDA’s August projections of 10.779 billion bushels for U.S. corn and 2.692 billion bushels for U.S. soybeans. USDA will release their next revision of 2012 corn and soybean supply and demand projections on September 12.

Marketing Strategy
With the arrival of an early 2012 harvest grain producers have a new set of questions to answer. Should I store corn with Dec ‘12 new crop futures currently bidding at $8.13 per bushel (CME Group –CBOT)? Should I store $17.57 per bushel soybeans? Neither question can be easily answered. Some would question one’s sanity to place corn or soybeans in the bin for sale at a later date with prices at such lofty levels. However, even though there are not clear cut answers to these questions there are a few considerations that might help one to decide.

First, look at the carry or spread between futures contract months. It is duly noted that on Thursday, August 30 no carry exists in either the corn or soybean futures markets. We then might conclude that the markets are telling us that they want to buy your corn and soybeans now, bearing in mind that there are no absolutes.

Second, there is the matter of price. Some would argue that the corn market has to bid higher from current levels in order to ration supply so that we don’t run out before the next corn harvest begins. Others argue that the price of corn is already high enough to get that job done. Additionally, alternative supply sources for importing corn are currently being employed. New crop corn and soybean basis bids are being kept in check as a result, with new crop corn and soybeans currently in the ball park of 15 under locally. New crop corn has traded in a sideways pattern for the past month and will eventually break out moving either higher or lower depending upon whether new information is considered bullish or bearish. Simultaneously, new crop soybeans have been trending higher. It is going to take some time to sort this out. 2012 U.S. corn and soybean production most likely won’t be known until the January Supply and Demand report is released.

Third, the soybean market is said to be different than corn. The difference being that price will ration corn supply so that we don’t run out before the next harvest. The concern for soybeans, after experiencing a reduced 2012 crop in the Southern Hemisphere and a short crop in the U.S., is that supplies could possibly run dry by February. We are now beginning to believe that soybeans priced at the $20.00 per bushel mark (+ or -) is within the realm of probability.

So back to the original questions — should one store either corn or soybeans this fall? As laid out above one might suggest that it wouldn’t be out of the question to consider keeping a few beans around and maybe some corn in which case one will need to consider the next question. If I put some of the crop in the bin should I protect the downside?

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

Grain Marketing Highlights – August 24, 2012

Friday, August 24th, 2012

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

Volatile Markets Remain Long Term Bullish
The corn market has made an attempt to take out the August 10 new crop Dec ‘12 futures contract high of $8.49 this week, currently trading at $8.37 per bushel. The soybean new crop Nov ‘12 futures market contract achieved a new high on August 21, trading at $17.28 per bushel on Wednesday morning, August 22. These markets have bid higher for several reasons, among them, supplies will be short for both new crop corn and soybeans and while it is believed that U.S. corn demand can be cut enough to keep corn from running out before the end of the ‘12/‘13 marketing year the same may not hold true for soybeans due to a short 2012 Southern Hemisphere crop combined with a short 2012 U.S. soybean crop. The SRW wheat market has also been making a run toward taking out the recent life-of-contract high for the July ‘13 SRW wheat futures contract of $8.68 achieved on August 10, currently trading at $8.61 per bushel. The wheat market has benefitted from a slackening in the value of the dollar and production problems in several wheat producing regions/countries throughout the world e.g., Russia, Ukraine, Black Sea Region, and Australia.

Meanwhile, unless the Pro Farmer Crop Tour being conducted this week produces more dismal reports concerning potential 2012 U.S. corn and soybean yields these markets could remain in a sideways trading pattern until the September 12 USDA Supply and Demand report is issued based upon the idea that lower production numbers are already bid into the market. My gut feeling is that those that think the worst news from the tour came in on Monday, August 20 just need to wait until Illinois, Indiana, and Iowa yield reports come in from the tour results. Nebraska corn yield results reported last evening were in line with USDA’s August S&D report. Note: Nebraska has thousands of acres of irrigated corn, the three “I” states of the Corn Belt do not irrigate much corn. Yield reports from the states of IL, IN, and IA are likely to feed the bull in this market.

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

Grain Marketing Highlights – August 17, 2012

Friday, August 17th, 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.

Grain Marketing Highlights – August 10, 2012

Friday, August 10th, 2012

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

US Supply/Demand Summary, 8/10/12, Million Bushels

 

Corn

Soybeans

Wheat

Crop Year

11-12

12-13

12-13

11-12

12-13

12-13

11-12

12-13

12-13

Report Date

07/11

06/12

07/11

07/11

06/12

07/11

07/11

06/12

07/11

Carryin

1,128

903

1,021

215

170

145

862

743

743

Production

12,358

12,970

10,779

3,056

3,050

2,692

1,999

2,224

2,268

Imports

25

30

75

15

15

20

112

120

130

Tot Supply

13,511

13,903

11,875

3,286

3,235

2,857

2,974

3,087

3,141

                   
Feed

4,550

4,800

4,075

     

163

200

220

Crush/Mill*

1,360

1,390

1,320

1,690

1,610

1,515

941

950

950

Ethanol Prod

5,000

4,900

4,500

           
Seed/Other

30

30

30

101

124

116

77

73

73

Exports

1,550

1,600

1,300

1,350

1,370

1,110

1,050

1,200

1,200

Total Use

12,490

12,720

11,225

3,141

3,105

2,742

2,231

2,423

2,443

Carryout

1,021

1,183

650

145

130

115

743

664

698

Stocks/Use Rate

8.20%

9.30%

5.80%

4.60%

4.20%

4.20%

33.30%

27.40%

28.60%

Avg Price

6.1

5.9

8.2

$12.45

$14.00

$16.00

$7.24

$6.80

$8.30

*Excludes corn for ethanol

● The domestic estimates should be considered bullish for corn, bullish for soybeans and neutral for wheat.

● Ending stocks and stocks-to-use dropped for corn, soybeans and wheat.

● The buzz among commodity traders is likely to be whether the production numbers are low enough.

World S& D Summary, 8/10/12, Million Metric Tons

 

Corn

Soybeans

Wheat

Crop Year

11-12

12-13

12-13

11-12

12-13

12-13

11-12

12-13

12-13

Report Date

07/11

06/12

07/11

07/11

06/12

07/11

07/11

06/12

07/11

Carryin

127.47

129.37

135.97

70.19

52.51

51.94

197.97

197.18

197.59

Production

876.84

905.23

849.01

236.03

267.16

260.46

695.18

665.33

662.83

Total Supply

1,004.3

1,034.6

984.98

306.22

319.67

312.4

893.15

862.51

860.42

                   
Feed

507.58

535.95

508.74

     

145.64

130.33

134.09

Crush      

224.64

232.39

227.03

     
Other

360.77

364.56

352.9

29.2

30.76

29.89

549.92

549.73

549.16

Total Use

868.35

900.51

861.64

253.84

263.15

256.92

695.56

680.06

683.25

                   
End Carryout

135.97

134.09

123.33

51.94

55.66

53.38

197.59

182.44

177.17

Stocks/Use Rat

15.70%

14.90%

14.30%

20.50%

21.20%

20.80%

28.40%

26.80%

25.90%

● Ending stocks were reduced across the board for corn, soybeans, and wheat.

● Stock-to-use ratios were also reduced across the board for the world estimates.

Market Strategy
Commodity markets are expected to remain extremely volatile in the near term, although some analysts would argue that the August estimates may already be factored into commodity prices. It is more likely that crop production for 2012 corn and soybean production will be further reduced in the September S & D estimates. Fundamentally, the outlook remains bullish and should continue to support the corn, soybean and wheat markets. Currently, Dec ‘12 corn futures are trading at $8.22 per bushel, Nov ‘12 soybeans at $16.54; with July ‘13 SRW wheat futures at $8.57 per bushel.

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

Grain Marketing Highlights – August 3, 2012

Thursday, August 2nd, 2012

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

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.

Market Strategy
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.

Grain Marketing Highlights – July 27, 2012

Friday, July 27th, 2012

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

U.S. Drought Not Near Broken
The drought had not been broken by recent rains in the Northern Tier of the Corn Belt and scattered showers in the Eastern Corn Belt, as of Tuesday, July 24. In fact, noted climatologists are predicting the drought could linger into October. Crop conditions for U.S. corn and soybeans declined again this week as reported on Monday afternoon. The drop in crop condition ratings for the seventh or eighth consecutive week suggests very strongly that USDA’s 2012 production estimates for U.S. corn and soybeans can be expected to be lowered again in the August 10 release of the next supply and demand report.

The drop in commodity prices over the past couple of days has more to do with the actions of non-commercial traders than any perceived improvements in the weather. The commodity markets are highly volatile. Non-commercial traders drove prices to the point that there were no buyers. That precluded a sell-off on Monday and Tuesday of this week which should turn around once the fundamentals regain footing. For the most part, with the exception of the Northern Tier, the Corn Belt remains hot and dry with little chance of rain helping corn or soybeans make much, if any, recovery in yield potential.

The shortfall for 2012 U.S. corn and soybean production and the fact that the rest of the world (i.e., Ukraine, South America) will not have nearly enough corn to export to make up the difference implies that these markets remain extremely bullish. The correction experienced in these markets earlier in the week is being attributed to technical factors. It is too soon to suggest that these markets are anywhere near done rationing demand. Fundamentally nothing has changed. At some point in time two things could happen to turn the corn and soybean futures market to the downside: 1) demand rationing/destruction – where demand gets cut enough to begin the “short crop” price spiral downward seeking the equilibrium price where demand can be rebuilt. 2) A rain event that commodity traders interpret as a drought buster. Remember, it takes significantly less rain to break the market than it does to grow the crop.

U.S. and world wheat production has also garnered the attention of commodity analysts and traders with world wheat production falling short of original projections. Sizeable reductions are being made in wheat production forecasts for Kazakhstan, Australia, Russia, etc. This means that wheat producing countries throughout the world are now expected to have less wheat for export in the current crop year. The U.S. Drought Monitor released July 17 depicts most regions of the U.S. still under extreme drought conditions (http://droughtmonitor.unl.edu/). This week’s drought monitor map, updated as of July 24, will become available on Thursday, July 26. The map for this week is not expected to show any significant improvement over last week in the heart of the Corn Belt.

Bottom line: fundamentals remain bullish across the board. The commodity markets were engaged in a technical correction at the beginning of the week and have regained some of the losses incurred in Tuesday’s overnight and Wednesday morning’s trade. Volatility in these markets remains extremely high. This increases the risks involved in commodity trading. Corn, soybean, and wheat futures have recovered some of the losses incurred at the beginning of the week on Tuesday night and Wednesday morning. In e-trade on Wednesday morning, July 25 at 11:20 a.m. EDT Dec ‘12 corn futures were $7.88; Nov ‘12 soybeans at $16.07; and Dec ‘12 SRW wheat futures were bid at $ 9.14 per bushel. The strategy of scale up sales for new crop corn and soybeans should not be abandoned at this time.

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

Please Note: This is a fast moving market. Commodity marketing always involves risk. The current situation has added greatly to that risk. Carl is recuperating at home after cataract surgery on July 26. He will be checking the markets at home and can be reached at 302-690-1878.

 

Grain Marketing Highlights – July 20, 2012

Friday, July 20th, 2012

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

New Crop Corn Pushing Toward Historic $8.00 Mark
New crop Dec ‘12 corn futures may soon hit the $8.00 mark for the first time in history as the nearby Sept ‘12 contract did in overnight e-trade. With weekly crop conditions getting more dismal each week of the growing season, 2012 yield prospects for corn and soybeans continue to decline. On July 11 USDA estimated the U.S. corn yield at 146 bushels per acre, 20 bushels less than the June estimate. U.S. soybean production was estimated at 40.9 bushels per acre in the July report, a reduction of 3.4 bushels from June. Last week’s writing alluded to the idea that these estimates were likely to be too high due to the time lag between when the data is collected and when the report is released. The point being that U.S. crop conditions have not improved since before and after the release of the report. Further, weekly U.S. crop conditions have declined for six weeks in a row as of the release of this week’s report. Even if we see an improvement in crop conditions in next Monday’s report the damage to the U.S. corn crop has already been done.

The 2012 drought is one of the worst the U.S. has experienced from a national perspective since the 1950s, severely impacting a good portion of the Corn Belt states. Only 31 percent of the nation’s corn crop was reported as good to excellent for the week ending July 15 with 53 % reported as fair to poor. Eighteen states accounted for 92 % of the corn crop planted in 2011. National crop conditions for selected states are weighted based on 2011 planted acreage.

Market Strategy
The current situation consists of extreme market volatility. Extreme volatile markets add risks to using different marketing alternatives whether they are futures, options on futures, and/or cash markets. The added risks that are associated to the market greatly limits the opportunities to get any marketing done, although not necessarily impossible. Grain buyers are generally willing to work with producers to make any remaining old crop 2011 sales, 2012 new crop sales, and in some cases initial sales for the 2013 crop. Most grain marketers know what they can or cannot do in regard to making sales decisions. Meaning the individual producer usually knows the alternatives that they prefer to apply to making sales taking the current situation into account. In this kind of market all grain sellers should proceed with caution. Things are changing by the hour in the current market environment.

Currently, there is no carry in the corn, soybean, and SRW wheat markets. This means that the market wants to buy your grain now instead of later. Additionally, new crop corn, and soybean prices are making new life-of-contract highs almost daily. Both are strong indicators to be getting that portion of your crop that you know you are going to have at harvest sold with forward cash contracts and taking spot sales on any remaining old crop sales.

Drought markets are dictated by short crops. Short crops have long tails. This means that prices peak early to curtail demand, possibly before harvest and then tail off for a long period of time. The price peak curtails demand which is currently happening. USDA took 1.055 billion bushels out of projected U.S. corn use for the current marketing year from the June to July 11 supply/demand reports. They also increased beginning stocks by 50 million bushels from June to July. The tail off in price for a long period of time is the market looking to find the equilibrium price that will, hopefully, restore demand. Historically, no two drought markets have peaked at the same time. However, they have generally peaked anywhere from just prior to harvest, during harvest, or even into January. Remember, this year is different in that this drought is thought to be having a bigger impact on a larger portion of crop production areas than previous droughts. U.S. ending stocks for corn and soybeans are expected to drop to extremely low levels. That is why demand has to be rationed. Besides rationing demand, corn imports will be increased. It is rumored that freightliners of corn are now being lined up to bring corn into the Wilmington, NC port from South America.

This market will turn. No one knows just when that will happen. New crop corn prices attempted to make the historic $8.00 mark this morning but have now backed off at mid-day somewhat. If it is thought that demand needs to be rationed more prices will move higher from current levels. Once that task gets accomplished then the price will turn. The weather also weighs into this because it takes significantly less rain to turn the market than to grow the crop. It is important to focus on getting new crop sales done before the market turns. Currently, in e-trade Dec ‘12 corn futures are trading at $7.81; Nov ‘12 soybeans at $16.42; and Sep ‘12 SRW wheat is at $9.18 per bushel.

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