Grain Marketing Highlights – June 1, 2012

Carl German, Extension Crops Marketing Specialist;

Weather and Outside Market Forces Impacting Commodity Prices
Recent rain may not be enough to alleviate declining crop conditions in the Eastern Corn Belt from now until the weekend according to crop observers. The U.S. corn crop declined by 5 points in the good to excellent categories from the week of May 20 to May 27. The conditions for crop development are important because it would take a nearly ideal growing season to achieve USDA’s projection of a 2012 U.S. average corn yield of 166 bushels per acre. For that to have a chance of happening U.S. crop conditions would have to take a significant leap forward when this week’s conditions are reported, week ending June 3. More rain is in the forecast between now and the weekend, however observers are suggesting it might not be enough to bring on the ideal conditions that are necessary to achieve the initial yield projection. Crop conditions begin being reported for U.S. soybeans on June 3. The Black Sea region and Russian grain producing areas are also reporting dry conditions that are likely impeding crop development.

Status of the Euro Remains Up in the Air
The equity and commodity markets have taken a pounding this week due to the uncertainty coming out of the European Union. The Dow has seen a significant drop (now at 12,419) while the dollar has increased in value (nearby at 82.925). The increasing value of the dollar is making U.S. commodities more expensive overseas. The weekly export report released this morning (May 31) was bearish for corn, bearish for wheat, and bullish for soybeans. As of this writing it would not be prudent to suggest what the outcome might be for the euro and the European Union. An analyst suggested this week that the impact wouldn’t necessarily be all that bad to world markets as long as the process of either mending and/or amending the European Union is orderly, key word being ‘orderly’.

Market Strategy
To some degree the diametrically opposed signals that we are getting concerning the grain markets signal different courses of action. Non-commercial longs have been exiting commodities positions for several weeks due to the uncertainty concerning potential crop size in the U.S./world and to a general slowdown in U.S. and world economies. A U.S. corn crop projected at the 166 bushel per acre variety would take new crop corn prices lower than they are now. On the other hand, tight old crop U.S. corn and soybean supplies suggest that it wouldn’t take much of a weather scare to rally prices from their current levels. Providing initial sales for intended 2012 corn and soybean production are booked, a gut feeling is to go with the weather uncertainty placing additional sales on hold. The next USDA monthly supply and demand report will be issued on Tuesday, June 12. Currently, in e-trade Dec ‘12 corn futures are at $5.12; Nov ‘12 soybeans at $12.89; and July ‘12 SRW wheat at $6.50 per bushel.

For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.

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