Report adds price pressure
7/5/16 — The USDA report last on June 30 added to an otherwise bearish situation with acreage projections that were above most estimates in wheat and corn, and about at the estimated level for soybeans. Stocks also were more burdensome than expected, especially in corn and wheat, and that helped to put pressure on the market last week, pressuring corn down near their contract lows and plunging wheat into new low territory.
The USDA report on planted acreage and stocks was mostly negative, with corn acres 1.25 million larger than expected (about 200 mb), and stocks 200 mb larger than expected as well for a surprise of 400 mb larger potential ending stocks. Soybean acreage was just slightly smaller than expected but 1.5 million acres larger than March (-7 mb), but the stocks were 41 mb larger than expected for a net gain of 34 mb ending stocks. The market reacted positively on Thursday, but could not hold all of those gains Friday. What will this week bring?
Wheat stocks were as expected, but acreage was about 1 million larger than expected for a 40 mb hike in potential ending stocks. So all around, it was a negative report, and we mostly got negative numbers because of it. It will take that much more of a weather problem to get the market excited again, and so far that weather problem (while forecast by some) is not really showing up in the next 14 day forecast.
So prices may be likely to drift lower, unless a large weather pattern change comes into the forecast (and it will have to come fairly soon to hurt corn pollination). Weather forecasts for the 7 day are a bit warmer today than Friday, with the extended 8-14 day forecast similar. But there is also a bit more rain in the forecast today than when we left last Friday, making it more like a mixed forecast as we enter July.
As we stated last week, prices had risen over $3 in soybeans and $.85 in corn into mid-June, making sales attractive again in late May/early June. Pro Ag advised buy, buy, buying this winter at the lows, and now finally we were advising selling some corn and soybeans in late May/early June.
Soybeans dropped a buck in about 2 weeks, only to recover about half of that loss at near the $11.35 Nov. futures mark. We went much higher for a brief time after the USDA June 30 report, giving an opportunity for catch up sales of soybeans. But there isn’t much opportunity to sell corn now, with its precipitous drop the past few weeks pushing us back down to the recent lows. In fact, we are lower than the revenue price guarantee made last February (which wasn’t all that great a price either).
Wheat has been a disappointment this year, with prices not fluctuating much up due to the large yielding winter wheat crop in 2016. USDA is already projecting a record shattering yield of winter wheat at 50.5 bu/acre, 2.7 bu/acre larger than any other winter wheat crop in the history of the U.S. So in spite of nearly 10% smaller winter wheat acreage, we still might end up with about 10% larger production as the yield is that good. So wheat prices have not given much opportunity to price anything this year. Perhaps after harvest prices can muster up some strength, but the U.S. dollar strength after the vote of Great Britain to leave the EU was somewhat devastating to wheat prices as we went to new lows in all 3 markets. If you have wheat you are forced to sell in this downturn, you may want to look for a way to own it back as prices are already very bad.
There still is a lot of summer left as far as weather, but with corn and soybeans mostly planted early along with HRS wheat, it may be difficult to get much of a weather rally going unless the weather is drastically bad. If not, then we may have all the grain priced pre-harvest we are going to get done, and we may have to wait for post-harvest pricing opportunities.