Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
General Comments
The grain and oilseed markets are a moving target. Information is constantly fed into the trading pits where commodity prices are bid accordingly, seeking to find equilibrium. At times isolated events can have drastic effects upon prices. At other times the information hasn’t really changed all that much from month to month or week to week. It is important for us to weigh the factors that are impacting the commodities market while not losing sight of those factors influencing the markets that have not changed. Crude oil prices, while recently peaking at $133.70 per barrel, have backed off this week with July crude trading at $129.86 in overnight trading. The U.S. dollar index, which set its low at 71.05 on April 22nd (closing at 71.54 that day), closed at 72.62 in yesterday’s trading. The point being that energy prices are still high and the value of the dollar is still low. The looming question, as related to commodity marketing, is whether these factors (oil prices and the value of the dollar) are changing. Could we be seeing a reversal in the trends?
Apparently, the verdict is still out on the influence that Index Funds have on commodity prices. The Commodity Futures Trading Commission (CFTC) issued a report, prior to the conduct of the April forum, stating that the funds are not having any undue influence on commodity prices. Obviously, there are varying opinions on this issue. The biggest influence in these markets may well be the fact that we are dealing with demand driven markets. Eventually, any vagaries in the markets will work themselves out. In the meantime, we shouldn’t look for any changes forthcoming regarding trading rules for the different classifications of speculative traders.
Corn Analysis
The nation’s corn crop is now 88% planted, 6 to 8 points behind the same week last year and the 5-year average. Slightly over half of the crop is emerged, running about 14 points behind last year and 28 points behind the 5-year average. A warming trend is forecast for the Corn Belt this week with temperatures around the 80 degree mark which is expected to enhance ’08 crop development.
USDA officially opened some of the CRP to haying or grazing late Tuesday. Futures traders were said to view this development as slightly bearish to corn futures because the decision could result in slightly less corn being fed.
Weekly export shipments of U.S. corn are considered neutral to bullish. Neutral because actual shipments were running well behind the pace needed to meet projections. Bullish because the combined export sales report showed sales at 30.6 million bushels. This was above the range of estimates and slightly ahead of that needed to stay on pace with USDA’s projection of 2.5 billion bushels to be exported in the ’07/’08 marketing year.
Soybean Analysis
Argentine soybean export shipments have been stopped again due to the farmer strike. In the short run the Argentine strike is beneficial to U.S. and Brazilian export business. The soybean harvest is now complete in the Southern Hemisphere. U.S. soybean planting is now slightly over 50%, running 22 points behind the 5-year average and 15 points behind last year.
The weekly export sales report for soybeans was bullish. Only 0.5 million bushels (mb) were needed last week to stay on pace with USDA’s projection of 1.090 billion bushels for the ’07/’08 marketing year. The combined total for weekly sales was reported at 31.9 mb. Shipments were also ahead of the amount needed to be on pace with projections.
Wheat Analysis
As the ’08 wheat harvest nears, pressure is said to be building on wheat prices. World demand for new crop wheat is very strong. The actual size and quality of this year’s harvest won’t be known until the wheat is in the bin. Wheat prices are being supported by outside forces.
Accumulated sales for the 50th week of this marketing year for wheat are at 1.257 billion bushels as compared to USDA’s forecast of 1.280 bb. Weekly sales were within the range of estimates. Shipments were far behind the 57.7 mb needed to stay on pace with projections. The export situation for wheat is said to be bearish to neutral.
Market Strategy
Throughout the summer, commodity markets will be driven by weather developments, energy prices, the value of the dollar, fund investing, and global demand. Normally speaking, the corn market is entering that period of time that a seasonal high is made. Whether that holds true this year or not depends upon crop development. Remember, there is no room for margin of error in U.S. corn and soybean production this year.
The soybean market is currently being influenced by the situation in Argentina. China has been on a buying spree in recent months in preparation for hosting the Olympics. The consuming public is beginning to conserve by cutting back on travel plans for the summer. More Americans stayed home this Memorial Day weekend when compared to last year. As demand for energy slows the price of crude oil is likely to come down.
The U.S. corn crop is nearly planted. Actual acreage planted will be reported on June 31st. Dec ’08 corn futures are currently trading at $6.15 per bushel; Nov ’08 soybeans at $13.48 per bushel; and July ’08 wheat at $7.49 per bushel.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.