Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Demand Slackens as Supply Concerns Loom
USDA’s next scheduled release of monthly supply and demand estimates for the U.S. and World will be on September 12. Adjustments are expected for 2011 planted acres and yield estimates for U.S. corn and soybeans. The market has recently traded in anticipation of the September report. Yield and planted acreage estimates are expected to drop further in the September report. This raises the usual question, how high can prices go based upon the expected downward revisions in U.S. corn and soybean production? The answer to that question can be summed up by simply stating that the size of the adjustments will determine whether prices need to bid higher from current levels in order to ration supply. In their July estimates USDA projected total use for U.S. corn for the 2011/12 marketing year at 13.5 billion bushels. Production was estimated at 13.470 billion bushels, 30 million bushels less than projected total use. This means that any downward revisions made in the September report will be price positive to U.S. corn and soybeans. Whether the revisions are considered to be already factored into prices on release day of the report or not will depend upon trader expectations going into the report (the rumor) and what USDA says the projected production is (the fact). An old marketing adage says to ‘buy the rumor, sell the fact’. The results of the Pro Farmer crop tour will soon be tabulated. Those results may garner the attention of commodity traders for a time but not for long, all eyes will be upon the September 12 report.
USDA Export Sales Report 08/25
Pre-report estimates for weekly export sales of soybeans ranged from 27.6 to 33.1 million bushels. The weekly report showed total old-crop and new-crop export sales of 24.1 million bushels, with old-crop sales 3.9 million bushels, bringing the yearly total to 1.552 billion bushels, above USDA’s demand projection of 1.495 billion bushels. Total shipments of 10.4 million bushels were below the 17.8 million bushels needed this week. This report is considered bearish.
Pre-report estimates had weekly corn export sales at 19.7 to 27.6 million bushels. The weekly report showed total old-crop and new-crop export sales of 20.7 million bushels, with old-crop sales of 15.1 million bushels, bringing the yearly total to 1.907 billion bushels, above USDA’s demand projection of 1.825 billion bushels. Total shipments of 32.5 million bushels were below the 44.4 million bushels needed this week. This report is considered bearish.
Pre-report estimates for wheat export sales ranged between 14.7 to 27.6 million bushels. The weekly report showed total export sales of 12.8 million bushels, below the 16.1 million bushels needed this week to stay on pace with USDA’s 1.1 billion bushel demand projection. Total shipments of 17.2 million bushels were below the 20.9 million bushels needed this week. This report is considered bearish.
This report should be considered bearish.
Market Strategy
Those that have corn and soybean bushels to sell are currently sitting in the driver’s seat, with new crop prices trending higher. Generally speaking, it is a good idea to reward market rallies with sales. New crop corn and soybean futures made new highs this week due to U.S. production concerns. Advancing sales on a portion of the remaining bushels would seem to make sense. Basis levels could widen drastically in the event USDA were to exceed expectations in revising the crop size down. Currently, Dec ‘11 corn futures are trading at $7.38; Nov ‘11 soybeans at $13.87; and July ‘12 SRW wheat at $8.16 per bushel.
For technical assistance in making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.