Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Weather and June 30th Planted Acreage Report to Determine Price Direction
So far this month we’ve seen the publishing of a rather insignificant June supply and demand report with two exceptions: the projected yield per acre for U.S. corn was reduced slightly resulting in a lower carryout estimate; and ending stocks of U.S. soybeans were reduced for both the ’08/’09 and ’09/’10 marketing years. Those factors were price positive, along with the price of crude now climbing into the $70 (+) range and the dollar index trading near 80. The most negative factor influencing commodity markets since the release of the June 10 S/D report is the trailing off of the Dow, trading at 8,550 this morning. A few days before the release of the June report some analysts were suggesting that we could see a continuation of the seasonal rally for corn to continue for an extended time, beyond early June, due to the lateness of the ’09 row crop season. Instead, within a couple of days of the release, corn, soybean, and SRW wheat prices plummeted. There are likely to be reasons for the recent price drop occurring, among them, commodity prices may have been getting too high too soon, creating an overbought situation and the non-commercial speculative traders decided for the time being to take profits from their long positions. Another might be that commodity traders had already discounted the information in the June S/D report into the market. In the last five trading days Dec ’09 corn futures; Nov ’09 soybean futures; and July ’09 SRW wheat futures dropped about 50 cents per bushel, respectively. Nevertheless, the task at hand remains looking ahead.
USDA Export Sales Report 06/18 07:35
Pre-report estimates had weekly corn export sales at 650,000 to 1,000,000 metric tons (23.6 million bushels to 39.4 mb) combined old-crop and new-crop sales. The weekly report showed export sales of 767,300 mt (30.2 mb) in old-crop corn, well above the 236,000 mt (9.3 mb) that was needed to meet USDA’s projection of 1.75 billion bushels, while new-crop sales were 376,200 (14.8 mb). Total shipments of 817,900 mt (32.2 mb) were below what was needed this week. This report should be viewed as neutral to bullish.
Pre-report estimates for soybeans ranged between 50,000 mt and 250,000 mt of combined old-crop and new-crop sales (1.8 mb and 9.2 mb). The weekly report showed export sales of 145,700 mt (5.4 mb) in old-crop soybeans, above the 28,800 mt (1.1 mb) that was needed to meet USDA’s revised projection of 1.25 bb, new-crop sales were 105,000 mt (3.9 mb). Total shipments of 349,400 mt (12.8 mb) were below what was needed this week. This report should be viewed as bullish.
Pre-report estimates for wheat ranged between 200,000 mt and 500,000 mt (7.3 mb and 18.4 mb) of export sales. The weekly report showed export sales of 268,800 mt (9.9 mb), below the 411,900 mt (15.1 mb) needed to stay on pace with USDA’s projection of 900 mb. Shipments of 392,800 mt (14.4 mb) were below what was needed this week. This report should be viewed as bearish.
Market Strategy
Have commodity prices already peaked with the start of summer just around the corner? We’d all like to be able to answer that question definitively. However, there are a few factors that don’t add up to higher and higher prices occurring over the summer, according to Darrin Newsom, DTN Market Analyst who will be alluding to these factors during a Summer Market Outlook presentation to be given this afternoon.
For example the Dow has recently descended and now has a summer target in the vicinity of 7,800. The dollar index, having dropped 10 points since March, is now expected to strengthen – summer target 84.00.
The front-month corn price recently hit $4.50, putting the market in the upper third of the price range. Seasonally corn tends to fall 26% from early June through early August.
Soybeans tend to rally about 10% from early June through early July and then falls about 25% through August. An early seasonal high may have occurred in June. The carry in the new crop futures spreads suggests that the November soybean futures contract could begin to come under pressure.
SRW wheat is now in a seasonal down trend with the U.S. wheat harvest now underway. Seasonally SRW wheat tends to decline 4% from early June through mid-August.
The trend remains up for corn and soybeans, more so for soybeans than corn. The underlying current of a more bearish tone coming into play in these markets could be over shadowed by a surprise in the June 30th Actual Plantings report and questionable weather for new crop development. Considering the uncertainty in these markets, which makes more sense – pulling the sales trigger on a portion of new crop soybean sales now or waiting to see what the summer brings? It may be advisable to consider making a soybean sale prior to the release of the plantings report and waiting to see the report before advancing sales on new crop corn.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.