|
|
Grain report By Dr. Robert Wisner
Corn
Plan to use rallies in the next few weeks to boost old-crop corn sales and to price new-crop corn you will need to move at harvest. Use USDA’s Aug. 10 crop forecast as a key indicator for price direction in the weeks ahead. Combined domestic and export demand for U.S. corn in the September 2007 to August 2008 marketing year is expected to be about 12.5 billion bushels. A forecast of production 0.3 to 0.5 billion bushels above this level likely would set the stage for weakness in prices and the basis into harvest. A crop of that size would be 20 to 24 percent larger than last year’s harvest and would stress receiving, drying and storage facilities at harvest. Potential bottlenecks at grain elevators also would very likely depress the basis significantly from mid-summer levels. Pressure on marketing facilities would vary considerably from one area to another, depending on the local crop size and elevator facilities.
An anticipated crop of 12.3 billion bushels or less would signal that corn supplies are likely to tighten further in the year ahead. That news would be supportive to prices and would increase market sensitivity to any late-season threats to the crop such as an exceptionally dry August or worries about early frost.
The Southeast is not a large corn producing region, but this year’s high corn prices enticed cotton farmers there to shift a lot of cotton acres to corn. Its total production will be small in comparison with the Midwest, but loss of a modest amount of bushels in the South this year will be more significant than in the past.
Domestic corn demand indicators continue to look strong. Enough ethanol processing capacity is under construction to double the industry’s capacity, and most of those plants should be operating in 12 to 18 months.
Soybeans
Soybean prices in the next several weeks will take direction from the Aug. 10 crop forecast and weather through the end of the growing season. Old-crop supplies will be ample to carry the industry into harvest season. The key question is, “how sharply will carryover stocks decline in the next year?” While most analysts do not expect a serious Asian soybean rust problem, rust is present in a small area of Louisiana and eastern Texas. With wind and rain moving from the Gulf coast up the Mississippi and Ohio valleys, there would be a chance for some Asian rust to spread into parts of the Midwest. That happened last year, but the rust came in late enough that it did no significant damage. The other key weather variable, of course, is August rainfall, since August is the most critical part of the soybean-growing season.
Consider rallies between now and early September as opportunities to increase sales of old-crop soybeans and new-crop supplies that you will need to move this fall. If you have adequate on-farm storage, prospects for profits from storing into at least early winter look favorable. A strong Brazilian currency has increased the dollar price needed to attract more soybean acres in Brazil. Early indicators point to continued strong import demand from China, and December to January prices will be unusually sensitive to any serious weather or disease threats to the crop in either Brazil or Argentina.
An Aug.10 USDA soybean yield forecast of 41 bushels per acre or lower would likely be supportive to soybean prices into at least early September, extending your time to catch up on old-crop and harvest-time sales. That would signal that a slightly larger decline in soybean carryover stocks is likely in the year ahead than most analysts had been expecting. A U.S. yield forecast of 43 bushels per acre or higher could temper or slightly weaken bean prices into the harvest season.
Prospects for storage returns into the fall are a bit more uncertain than usual. As we went to press, wheat futures at all three major markets were at historically high prices of over $6 per bushel. Depending on where corn prices end up this fall, a wheat market at that level may reduce foreign wheat feeding, tempering upside price potential unless weather concerns develop.
Wheat
In the next several weeks, wheat prices will be unusually sensitive to any changes in estimates of U.S. wheat yields as well as crop wheat acreage to be harvested for grain. The market also will pay much closer attention to crop reports from Canada, Europe, China, former Soviet republics, Australia and Argentina than in the past. USDA’s Aug. 10 world crop report may be about as important as the U.S. crop estimate to be released on the same day. That’s because world wheat stocks were already at record low levels as a percent of annual use at the start of the current marketing year, and they are projected to decline by another 6 to 9 percent in the year ahead. The sharp decline in global stocks last season reflected both foreign and U.S. crop problems.
Australia’s crop dropped 58 percent from the previous year because of severe drought. Production also was down substantially in the EU and former Soviet republics.
Early reports indicate production in both the EU and former Soviet republics has been limited some by dry weather again this summer. Australia’s Wheat Belt, of course, is south of the equator. That means its growing season is 6 months reversed from ours. The Australian harvest typically is in November and early December, so it is too early to get a precise reading on its production potential although significant recovery is anticipated in its crop.
Wheat prices also will be more sensitive than in the past to trends in corn and soybean prices this fall.
Click here to respond to an article Top of page
|
|
