Grain report
By Dr. Robert Wisner

Corn
Look for a very volatile corn market in June and July in response to later than normal plantings, uncertainty about final planted acreage and less U.S. and global wheat feeding this summer than expected earlier. Plan to use rallies to boost old-crop corn marketings and sell new crop you’ll need to move at harvest for cash flow reasons or lack of storage. A large increase in ethanol processing capacity will be coming on line this fall and winter and will bring a sharp increase in domestic demand for corn. Hog farrowings and recent increases in placements of cattle into feedlots suggest that domestic feed demand also will remain strong.

It would not be surprising to see export demand slip, but the sharp increase in corn processing for ethanol almost certainly will outpace any drop in exports. Easing of export demand is anticipated in response to a sharp increase currently estimated for corn production in Brazil and Argentina. Argentina’s spring harvest was delayed by heavy rains in parts of its corn-growing region.

The crop may also have been reduced some by possible losses due to flooding, although losses are believed to be very modest. A sizeable part of Brazil’s corn crop is planted after the soybean harvest and faces volatile weather during its fall/winter growing season. U.S. corn exports also will be affected by global wheat feeding. That’s a big competitor in world markets.

Recent reports indicated wheat areas in Europe and parts of the former Soviet republic were dry and the weather could begin to trim yields.

Watch for USDA’s June 29 Planted Acreage and Grain Stocks reports. Both will be important indicators for the corn market. As we went to press, trade expectations were that about

2 million acres of the intended corn plantings probably shifted to other crops.

Beans
Soybean prices will follow the corn and wheat markets to some extent, but unlike those two crops, supplies will be fully adequate this summer. With good August weather and near-normal yields, bean supplies should be adequate for the coming year, although less burdensome than this season. Also, soybean plantings likely will be larger than indicated in the March USDA intentions survey. Technical indicators and the potential for planted soybean acreage to exceed the USDA planting intentions survey also spell caution for late-summer soybean prices if yield prospects look good.

Plan to use rallies in the next few weeks to boost sales of old-crop beans to cover cash-flow needs and sales of new-crop beans you will need to move at harvest. If you have enough storage space, check out bids for delivery of old- and new-crop soybeans for next spring or summer 2008.

At press time, futures for July 2008 were 75 cents higher than for current delivery. Add in potential for basis improvement from recent depressed levels and at some locations elevators or processors may be able to pay enough to justify storing for another year.

Un-priced storage carries significant risk, but if you have enough on-farm storage, consider that 1) more U.S. bean acres likely will be shifted to corn in 2008 to supply the growing demand for ethanol; 2) the U.S. soybean carryover may be cut in half by Aug. 31, 2008; and 3) South America will need a price incentive to expand its soybean plantings.

Areas where farmers are expected to have planted more soybeans than indicated in March intentions include a large belt running from central Nebraska across the central one-third of Iowa into some parts of northern Illinois, Indiana and Ohio. These areas had delayed corn plantings. Also, some failed soft red winter wheat is believed to have shifted to full-season soybeans.

Wheat
The U.S. and world wheat supply/demand picture is more uncertain and more important than usual to wheat markets this year. World stocks are at record low levels as a percent of annual utilization. Dryness in parts of Europe has been a potentially negative influence on its yields. Add in uncertainty about the extent of damage and acreage losses from a widespread early April freeze in the U.S., and the result is market volatility.

Plan to use rallies to boost sales of old-crop hard and soft wheat and to sell new-crop you will need to move to cover cash-flow requirements. The odds look favorable for at least covering storage costs for storing into mid fall. If wheat crops in a few key foreign areas are disappointing, the low world stocks could provide generous returns for 4 or 5 months of on-farm storage.

In Australia, the crop harvested in late fall and early winter last year was cut 58 percent from 2005 by severe drought. As we went to press, most of its 2007 crop had not yet been planted, so it is too early to know how much recovery from last year’s drought may occur. The drop in Australia’s 2006 crop was equivalent to about 60 percent of U.S. exports. A recovery in its crop could have a big impact on wheat prices. Other uncertainties in the international picture include the size of crops in India and China. India shifted from exporter to large importer last season because of weather problems. The odds are against 2 years in a row of crop problems there, as well as in Australia, but there are no guarantees against it. China imported some U.S. wheat for a couple of recent year but its imports have been highly variable from year to year depending on the size of its wheat crop.

In the U.S., a 1.5 to 2.0 bushel per acre reduction in the average wheat yield from recent USDA estimates or a 2 to 3 million acre drop in harvested wheat acreage would significantly tighten supplies.

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