Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Count Down to the July Supply/Demand Report
USDA is scheduled to release the July Supply and Demand report tomorrow morning, July 10. The question to ask ourselves isn’t whether any surprises are forthcoming, rather what are the surprises likely to be? Several areas of concern will likely impact commodity prices as the market moves to trade the new USDA numbers. They are: what will the yield forecast for ‘09 U.S. corn production be? Will the estimate for the demand for feed go down? Will the estimate for the demand for ethanol be changed? If so, what will become of the estimate for carry-over stocks? In short, for corn, the market is anticipating a resulting increase in the number for ending stocks. The proof is in the pudding. Since the release of the June 30 Acreage Report, where U.S. planted corn acres increased on the order of 2.4 million acres Dec ‘09 corn futures have fallen another 60+ cents per bushel. Favorable weather for U.S. corn production could result in USDA raising the national yield estimate. In June, USDA estimated the corn yield at 153.4 bushels per acre.
The soybean carry-over number will be quickly noted by commodity traders. If the ‘08/‘09 marketing year ending stocks number is less than 110 million bushels, that would be considered price positive for old crop beans. If the number is greater than 110 then that would be viewed as bearish, depending upon the resulting impact upon the ending stocks estimate for the ‘09/’10 marketing year, projected at 210 million bushels in USDA’s May report. The soybean market is in the process of transitioning from tight old crop to more adequate new crop supply. Ending stocks for new crop soybeans are likely to increase due to the acreage increase projected in the June 30 actual plantings report. Just from the acreage increase, U.S. soybean production will increase by an additional estimated 63.9 million bushels from the June 10 production estimate. The market is anticipating a larger U.S. soybean crop resulting in a larger ending stocks estimate for the new crop ‘09/‘10 marketing year.
USDA Export Sales Report (week ending July 2)
The most notable item in this week’s export sales report for corn is the shipments number, reported at 38.1 million bushels. This was below that needed this week to stay on pace with USDA projections. The anticipation is, with exports currently running about 5% behind the USDA estimate, that USDA will lower the ‘08/‘09 marketing year export estimate of 1.75 billion bushels which would increase ending stocks for the ‘08/‘09 and ‘09/‘10 marketing years.
Total U.S. soybean exports exceeded USDA’s projection for the ‘08/‘09 marketing year in this week’s report. That noted, then we could get a reduction in the ending stocks number for old crop soybeans.
U.S. wheat exports were reported as neutral to bullish. U.S. wheat exports were projected at 900 million bushels for the ‘08/‘09 marketing year in both the May and June USDA reports.
Market Strategy
Commodity prices have been recently stymied by favorable growing conditions for a crop that was planted late in the Eastern and early in the Western Corn Belt. Couple that with slackening oil prices and a weakening economy and we have had nothing but trouble developing for new crop corn and soybean prices. Non-commercial traders have continued to liquidate long positions. Meanwhile, the technicians were calling for a possible extended seasonal rally, one that would last longer than usual for corn and soybean prices. Obviously, that did not happen. Fundamentalists were anticipating fewer corn acres to be reported on June 30. That also did not materialize.
The reality is that new crop corn and soybean prices have dropped nearly $1.30 and $2.00 per bushel, respectively, since the beginning of the second week of June. Tomorrow’s report is important in that we need to see if USDA’s July projections offer commodity prices any help in the foreseeable future. Corn, soybean, and wheat futures are currently oversold. Dec ‘09 corn futures are currently trading at $3.37; Nov ‘09 soybeans at $9.07; and Dec ‘09 SRW wheat at $5.50 per bushel. For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.