Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Commodity Markets Gain Strength on a Myriad of Factors
Corn Analysis
U.S. corn planting continued to lag the five year average for the week ending May 15 in Monday afternoon’s release of USDA’s Weekly Crop Progress report. Sixty-three percent of the nation’s corn crop was reported as planted, twelve points behind the five-year-average. Emergence was reported at twenty-one percent, eighteen points behind the average. On the surface the planting progress doesn’t strike one as being all that bad, however, what has commodity traders in a quandary are questions concerning flooded acres, prevented planting claims, continuing rain delays, frost damage, and lost acreage. We are not likely to know the extent of acreage shifts and/or lost acres for at least a couple of months. Corn prices have turned higher in the last four trading days as a result. Additionally, the Dow and energy prices are lending support. This is a year where we have no margin of error for U.S. corn production. In May, USDA projected 2011 U.S. corn production at 13.505 billion bushels assuming 92.2 million acres planted and 85.1 million acres harvested at 158.7 bushels per acre (about 2 bushels per acre below trend). Traders now expect further adjustments to be made to the U.S. corn production estimate. The weekly export sales report was bullish for corn, although shipments are running five percent behind the projected pace.
Soybean Analysis
U.S. soybean planting was reported to be twenty-two percent complete, nine points behind the average. However, it is important to note that questions surrounding the soybean market, at the present time, have more to do with whether intended corn acres switch to soybeans due to necessity, eventually getting too late to plant corn. It will take about three weeks, around the 10 to mid-June, before that question can be answered. In the meantime, the soybean market appears to be getting a boost from the corn and wheat markets. The export sales report for soybeans is price neutral to bearish this week.
Wheat Analysis
Spring wheat planting was reported as thirty-six percent complete, forty points behind the average. Eleven percent of spring planted wheat was emerged, thirty-three points behind the average. Twenty-six percent of the winter wheat crop was reported to be in good condition as compared to fifty-two percent last year. Only six percent of winter wheat was reported to be in excellent condition, lagging last year by eight points. Generally, wheat thrives better under drier as opposed to wet conditions. This year parts of Kansas and the Southern Plains are experiencing severe drought, while the Northern tier, where spring wheat is planted is extremely wet. Suffice it to say that commodity traders are anticipating a reduction in 2011 wheat production. Again, we will know the extent of the damage to the wheat crop within the next two months. Reportedly, parts of Europe are also experiencing reductions in their intended wheat production. Europe is in the grip of a drought which could have devastating effects on yields. Conditions are said to be worsening daily in France, Germany, the U.K. and Poland–which account for around 65% of the 27-nation bloc’s wheat crop–and more heat and dryness are expected in May. France, Western Europe’s largest producer expects to grow less than 35 million tons, compared with 35.6 million tons in 2010.
USDA Export Sales Report 05/19
Pre-report estimates for weekly export sales of soybeans ranged from 7.3 to 14.7 million bushels. The weekly report showed total old-crop export sales of 6.1 million bushels, above the 2.2 million bushels needed stay on pace with USDA’s demand projection of 1.55 billion bushels. Total shipments of 4.3 million bushels were considerably below the 12.2 million bushels needed this week.
Pre-report estimates had weekly corn export sales at 31.5 to 39.4 million bushels. The weekly report placed total export sales (old-crop and new-crop) at 44.5 million bushels, with old-crop sales of 33.2 million bushels, well above the 15.8 million bushels needed to stay on pace with USDA’s demand projection of 1.9 billion bushels. Total shipments of 37.9 million bushels were slightly below the 42.2 million bushels needed this week.
Pre-report estimates for wheat ranged between 16.5 to 27.6 million bushels. The weekly report placed total export sales (old-crop and new-crop) at 29.4 million bushels, with old-crop sales of 4.7 million bushels, bringing total sales to 1.3 billion bushels, above USDA’s 1.275 billion bushel demand projection for the current marketing year. Shipments of 29.2 million bushels were well below the 51.4 million bushels needed. This report is considered bearish due to the shipment pace lagging the projection with only two weeks left in the marketing year.
Market Strategy
Currently, Dec ‘11 corn futures are trading at $6.68; Nov ‘11 soybeans at $13.45; and July ‘11 SRW wheat at $8.12 per bushel. These prices represent about a 40 cent improvement for new crop corn, 50 cents for soybeans, and about 90 cents per bushel for SRW wheat from last week’s recent lows. Some profit taking is likely to occur while traders anticipate their next move. What happens next will be largely weather dependent.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.