Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Commodity Markets Post Gains
Over the past twelve trading days new crop corn, soybean, and wheat prices have regained some of their recent losses. Dec corn has recovered nearly $1.20 per bushel; Nov soybeans $1.80 per bushel; and Dec ’08 SRW wheat has increased nearly $1.50 per bushel from the lows that were made two weeks ago. With the U.S. 2008 row crop harvest fast approaching can we realistically expect the present rally to take on the elements of a bull market? To a large degree the answer to that question lies within the outcome of the ’08 harvest. U.S. soybean stocks are tight, estimated at 135 million bushels carry over for the ’08/’09 marketing year. Recent reports coming out of the Corn Belt suggest that this crop needs rain in order to fill pods. In the event that we do not achieve the 40.5 bushels per acre average soybean yield for the U.S. as USDA has projected, then U.S. soybeans will get even tighter going into the ’09/’10 marketing year. There is also the question concerning the U.S. corn yield which USDA has projected at 155 bushels per acre. Some say it is out there, while others say it is not. The spreads between nearby futures contracts and the distant months suggests that commodity traders are more willing to believe that the soybean yield may end up being lower than USDA’s August estimate than the corn yield. In the event that the U.S. corn yield does not equal 155 bushels per acre then we will enter a situation where corn supply also becomes short. Bear in mind that ending stocks for U.S. corn are now projected at 1.133 billion bushels.
The dynamics of the grain and oilseed markets are changing – or are they? The price of crude is currently about $25.00 per barrel lower than the high made on July 11th. One week ago crude oil was about $35.00 per barrel lower than the high made on July 11th. Corn prices are now about $1.25 per bushel lower than the high made on June 30th and soybean prices are about $2.25 per bushel lower than the high made on July 3rd. The U.S. dollar index has improved about 5 points since July 15th. The commodity markets remain extremely volatile and susceptible to outside forces.
Market Strategy
Several factors line up to suggest that this is not the time to be advancing sales for the ’09 harvest. The possibility of an early frost bears mentioning. In the event that a killing frost were to occur before the first week of October, Allendale, Inc. estimates that U.S. corn production would drop by 800 million to 1.14 billion bushels of production from the current forecast of 12.288 billion bushels, depending on the date of the possible frost. That amounts to 66% to 100% of the projected U.S. corn carry for the ’08/’09 marketing year. World affairs are far from settled. New conflicts throughout the world can lead to higher oil prices which in turn are likely to increase the price of corn and soybeans. Corn and soybeans are going to need to bid for acres for the ’09/’10 marketing year which suggests that a counter seasonal rally may be beginning. Currently, Dec ’08 corn futures are trading at $6.16; Nov ’08 soybean futures are trading at $13.54; and Dec ’08 SRW wheat futures are trading at $9.35 per bushel.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Cops Marketing Specialist.