Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Commodity Traders Wait for News
The price of crude oil has continued to creep up, establishing a new high around $125.69 per barrel this week, and currently at $124.22 per barrel. The U.S. dollar index appears to be stabilizing. It has not improved above the 73.5 mark. However, the bleeding seems to have alleviated for the moment. A stabilizing dollar and high commodity prices are likely to reduce U.S. exports. USDA indicated as much in their May Supply/Demand estimates. U.S. export projections for the ’08/’09 marketing year are projected to decline by 400 million bushels for corn; 40 million bushels for soybeans; and by 205 million bushels for wheat from their ’07/’08 marketing year levels.
Corn Analysis
The commodity markets appear to be in a consolidating mode as we wait to see what happens next with crop planting progress and weather developments. As of Monday, May 14th 51% of the nation’s corn crop was planted, as compared to 27% the week before, 71% last year and the 5-year average of 77%. Growing conditions have been less than ideal throughout portions of the Corn Belt and it remains to be seen just how soon the rest of the corn crop can get planted. On Monday, about 11% of this year’s corn crop was emerged as compared to 32% last year, and 33% for the 5-year average.
Even though we have seen the corn market in a correction mode this week, the trend in corn is still up. New crop corn futures are trading about 27 cents per bushel off of last week’s high, currently at $6.20 per bushel. The U.S. corn crop will need ideal growing conditions in order to produce trend line yield this year. The reason being that the U.S. will need to carry 800 million to 1 billion bushels to meet pipeline stocks (the minimum requirement to ensure an orderly flow of grains after harvest is complete). USDA projected ending stocks of 763 million bushels for the ’08/’09 marketing year in their May S/D estimates. These numbers make it perfectly clear that we have no room for margin of error this growing season.
Soybean Analysis
Rumor has it that the strike by farmers in Argentina that has rallied the new crop Nov ’08 soybean futures contract this week may end soon. The new crop soybean futures contract is now within $1.00 per bushel of its life of contract high, currently trading at $13.33 per bushel. The rally has presented an opportunity to advance soybean sales up to the 30% level for those that have not done so already.
Wheat Analysis
The soft red winter wheat price is down about 40 cents per bushel this week from a week ago. The May supply and demand report has apparently sent non-commercial traders to the sidelines. U.S. and world wheat supplies are expected to increase as the ’08 harvest gets underway. Argentina’s ’08/’09 wheat planting is expected to fall due to dry weather and disruptions caused by the rift between farmers and the government. Any reduction in production will come out of exports, as their government has limited shipments to ensure domestic supply and low local prices. Argentina typically supplies about 7 to 8% of the world’s export needs.