Downside weekly reversals are potential top
Last week's downside weekly reversals in corn and soybeans are looking awfully formidable on charts this week, especially with improving weather in the Corn Belt as we approach the critical pollination stage of development nationwide. That doesn't bode well for corn and soybean prices as we move into the critical July time frame. So far, crops are still indicating average or slightly above average yield potential in corn and soybean country, so an improvement in weather now could provide the bumper crop the US (and world) so desperately need.
While the Corn Belt is forecast to have cool/wet weather in the dry central and eastern areas the next 2 weeks (and also in the dry Delta/Southeast US), warm/dry weather elsewhere in the soggy western Corn Belt should allow crops to improve there as well, leaving the corn and soybean crop with negative fundamentals to go along with negative technical formations. There is an increasingly strong possibility that we may have topped the corn/soybean markets pre-harvest. That doesn't mean that prices cannot go back up to $4 corn and $9 soybeans sometime by next spring, as the world will continue to need to attract additional grain production to take care of traditional and new biofuels demands. But Pro Ag also feels it's possible to see harvest lows in Dec corn of $2.80 futures and Nov. beans of $6.50 futures.
WHEAT LESS PREDICTABLE
Wheat seems to be less predictable, as world wheat production estimates seem to continue to shrink in spite of historically high prices. Weather is improving in the US for winter wheat harvest, as warm/dry weather in the winter Wheat Belt the next 2 weeks (except for eastern OK/TX/KS) should allow rapid harvest progress the next 2 weeks in much of Winter Wheat Belt. There could be some heavy selling of 2007 crop wheat as prices are very good ($6) in most areas, and yields will start to rise as we move north and west in the winter wheat harvest. The surprise 2 million acre cut in Canadian wheat planted acres took the market by storm this week, and is puzzling to say the least.
How could both wheat and minor crops acreage be cut from earlier intentions ALONG WITH summer fallow acres? Where did those 2 million acres go? It seems odd that with high prices Canadian farmers would plant LESS acres than before! This makes almost no economic sense, but will be an unanswered quandary for the next few weeks.
FIGURING THE ACREAGE REPORT
The USDA June planted acreage report should provide some excitement Friday morning, as many analysts predict slightly more corn and soybean planted acreage. Pro Ag expects 0.5-1 million additional corn acres due to the relatively profitable offers during planting for corn relative to soybeans/oilseeds. We also anticipate up to 1 million acres additional soybeans planted due to the winter wheat freeze damage at Easter. That could also serve to pressure corn/beans into next week if correct.
While these acreage numbers will be important for Friday's trade, weather will continue to dominate July trade (as it typically does), as the eastern Corn Belt, Delta, and southeast will have very favorable weather with .5-2", locally 3-4" rains falling the next 3 days in about 85% of these areas. This will further shrink the drought impacted area the next few days and allow favorable conditions entering the reproductive stage of corn development. It's likely with this change in weather that the dry eastern Corn Belt will have an above average crop in 2007, further improving supplies. Pro Ag expects another improvement in crop conditions next Monday as the soggy west dries out and the dry east gets more rain this week. Its starting to look more and more probable that the US will have a bumper crop of corn and soybeans in 2007. Combined with very good crop conditions for wheat in North America, supplies should be much improved from last year.