By Ray Grabanski
Special to the Farm Forum
7/10/18 — Grains are cheap after the month of June, where we went from yearly highs to yearly lows. Some market player sold millions of bushels of soybeans in the month of June, with relentless selling that didn’t even allow for a dead cat bounce which grains are so popularly known for. This seller seemed more intent on pushing soybean prices (and all grains) down than getting the best price for their long positions. Who could that player be?
With soybean prices $2 lower and corn 80c lower than last month, we now have a situation where U.S. soybeans are priced 20 percent lower than Brazilian soybeans! That $2 difference is interesting, as it’s very similar to the 25 percent tariff that has been imposed on U.S. soybeans (and none on Brazilian soybeans). Interesting!
So we have market prices now near the lows of the year (and even multiple years), with prices basically in the cellar for now. The problem is that prices could very well stay in the cellar until something changes on the export lineup, or on the production lineup for U.S. crops.
Its becoming more and more likely that U.S. crops in 2018 will not be a failure, and possibilities of threats to the crop are waning as well. We are well into pollination of corn now in the U.S. and starting podding of the soybean crop. Still, we have mostly adequate soil moisture or better in most areas, and there doesn’t seem to be a threat of hot temperatures for any extended period at this point. So it’s becoming more and more likely every day that U.S. crops will be adequate or better in yield (for the fourth straight year!). There is little threat of frost damage, as in spite of late planting, crops are now about 7-10 day ahead of normal in nearly the entire U.S.
Weather forecasts are fairly stable in calling for above normal temps for the next 7 days in most of the U.S., with precip levels normal to above normal in a band from the 4 corners through Nebraska, Iowa, Illinois, Kentucky, and Tennessee. The rest of the U.S. will see below normal precip the next 7 days. The 8-14 day forecast is cooler, with mostly normal temps in the west and above normal temps in the east. Precip amounts are near normal in much of Iowa, Illinois, Colorado, and the southeast U.S. but below normal elsewhere. Temps cool to normal in the west, but still normal to above normal in the east. This is not a threatening forecast for most of the Midwest through pollination of corn. Today’s rainfall is mostly limited to North Dakota and Minnesota, while the rest of the U.S. is dry once again. There are areas that are getting dry after weeks of limited rainfall, and there will start to be stress and yield losses in these areas.
Crop progress reports came out yesterday, and mostly the crop conditions were relatively stable, with soybean conditions unchanged at 71 percent rated G/E and corn conditions down only 1 percent at 75 percent rated G/E. Pro Ag yield models were higher for both crops, with corn gaining 0.92 bu/acre to 176 bu/acre, and soybeans up 0.218 bu/acre to 48.74 bu/acre. These are both bearish numbers, and reverse the direction from last week’s decline. Corn is now 37 percent silking, 19 percent ahead of normal so pollination is well underway. Soybeans are 47 percent blooming (20 percent ahead of normal), so podding will quickly begin as well in half of the crop with 11 percent currently setting pods (7 percent ahead).
Cotton is 59 percent squaring, 4 percent ahead of normal, and 21 percent setting bolls (6 percent ahead), with 41 percent rated G/E (down 2 percent) and well below last year’s 61 percent level. So cotton is suffering a bit under the heat, with conditions rated low and declining. Sorghum is 22 percent headed (3 percent behind), and 17 percent coloring (equal to normal), but ratings are also declining, down 2 percent this week to 51 percent rated G/E. Winter wheat is 63 percent harvested, 2 percent ahead of normal.
HRS wheat is 81 percent headed, 12 percent ahead of normal, and is rated 80 percent G/E (up 3 percent from last week). Barley is 78 percent headed (5 percent ahead), and ratings also rose 1 percent to 85 percent rated G/E. Oats also is 91 percent headed (2 percent ahead), and 10 percent harvested (1 percent ahead), with ratings steady at 73 percent G/E. The small grain just keeps getting better this year after a horrible start, as rains continue to fall in these areas. Warmer than normal temps have pushed crops rapidly towards maturity, and sometimes that is not good for yields. But with adequate moisture, so far that is not showing up in crop ratings. Soil moisture levels are down 3 percent topsoil to 70 percent this week rated adequate/surplus, with subsoil down 3 percent as well to 68 percent rated adequate/surplus. But these levels are still similar to last year’s ratings.
Overall, the crop is still essentially an above average crop in corn, soybeans, and most small grains so prices continue to sag as we continue to have trade disputes with many export customers, none more important than China, where we sell about 1/3 of our soybean crop and by far our largest bean export customer. Until new developments occur on that front, we may see prices remain in the cellar for an extended period of time.
Ray Grabanski can be reached at [email protected]