Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Fast U.S. Planting Pace May Detour Seasonal Price Increases
We are nearing the time period, late spring to mid-summer, when corn and soybean prices have a seasonal tendency to trend higher. This phenomenon generally results from uncertainties concerning crop size until the corn and soybean crops get beyond their respective critical growing stages, this year likely to be around June 1 for U.S. corn and maybe August 1 for soybeans. However, there is some speculation that this year may turn out to be different from the norm due to planting progress. For the week ending May 2, the U.S. corn crop was nearly 70 percent planted as compared to only 32 percent last year and the five year average of 40 percent. U.S. soybeans were reported to be 15 percent planted compared to 5 percent last year and the five year average of 8 percent. The rapid pace of planting could mean that farmers plant even more corn than the March 31 Planting Intentions report indicated.
Global Factors Impacting Commodity Prices
As if the fast planting pace isn’t enough to cast a shadow over seasonal price tendencies, the Dow has taken a beating this week due to financial concerns across the globe, notably Greece. Apparently, the International Monetary Fund will be stepping in to aid Greece and, hopefully, stave off bankruptcy. However, this does mean that the cost of doing so will fall upon the tax payers of the countries affiliated with the IMF. The primary IMF contributors are the U.S., Japan, and Britain.
After increasing for the past few months, crude oil prices are in the process of crashing in yesterday’s and today’s trading (Wednesday, May 5). Interestingly, this is happening during the BP oil leak in the Gulf of Mexico that is currently threatening the seafood, tourist, and many other industries along the U.S. Gulf Coast. So what is the reason for the sudden crash in crude oil prices? One reason being suggested by a reliable source might be contracting demand in the U.S. and world economies.
China is in the market to import as much as 500,000 metric tons of corn this year. China will become a net importer of corn this year, first time in eight years.
The Southern Hemisphere will be completing their harvest very soon. USDA’s May 11 supply and demand report will either peg South American production as unchanged or increased from last month’s estimate.
Market Strategy
At this time of year, it takes a wild guess (sometimes referred to as a wag) to determine whether to advance crop sales or not? Weather conditions, although nearly ideal at the present time, don’t mean much concerning the final outcome for 2010 U.S. corn and soybean production. Although a lot can happen to change market direction between now and summer the picture isn’t looking very price positive for either corn or beans at the moment. Therefore, the best advice concerning whether one should advance new crop sales now or not is to pay attention to necessary price objectives based upon cost of production plus profit and act accordingly. Currently, Dec ‘10 corn futures are trading at $3.86; Nov ‘10 soybeans at $9.60; and July SRW wheat at $5.11 per bushel. In the case of SRW wheat one should look to price new crop sales for later delivery. For example, Dec ‘10 SRW wheat futures are currently trading at $5.45 per bushel.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.