Soybean pricing opportunities
Allendale has released its corn production estimate for next Thursday monthly crop production and World Ag Supply Demand Estimate reports.
Only two estimates have been officially released publicly to the industry, Allendale's 12.795 bil bu and another firm at 13.375 bil bu. Allendale is using its yield est of 149.8 bu per acre vs USDA's most recent yield est of 150.3 bu per acre and the other firm at 156.6 bu per acre. Based on the ten year ave is for USDA to adjust its yield per acre from the June to July by an increase of .4 bu per acre.
Of the ten years, USDA has increased yield two times for an ave of 3.5 bu per acre with the high end of 4 bpa in 1999 when crop conditions were 77% good to excellent and the low end of 3 bu per acre when crop conditions were 75% good to excellent in 2003. Only twice in the most recent ten years has USDA reduced its bpa estimate and it was by 3 in 2005 when the crop condition was 62% good to excellent and in 1996 when the crop condition was 61% good to excellent. This suggest if crop conditions the Monday before the release of the crop production report are 62% or less there may be a reason for USDA to reduce yield. Conversely if conditions are 75% or more for the good to excellent category, there may be reason to increase yield per acre. If conditions fall into a range of 63% to 74% there may not be a need to adjust yield. This is the driving reason why we suggest USDA is likely to leave yield per acre unchanged from the June to July report, why Allendale will leave its yield unchanged and why we do not find it necessary to increase yield by 6.3 bu per acre above USDA's June estimate.
Corn Fundamentals: The focus remains on weather as the Midwest corn crop enters the key pollination phase. For the major Midwest, a brief warm-up this weekend then rains and more seasonal type temps for next week. It is the following weekend when longer range forecast suggest a substantial increase in day time temps which could jeopardize the crop. The most recent correction in corn prices is expected to spark end user demand on a scale down basis as long as weather remains beneficial. This was very evident in the weekly export sales report released on Friday. Old crop corn sales exceeded the pre release trade estimates. More impressive is how cumulative new crop corn sales at 182 mil bu are 329% higher than year earlier levels of 42.4 mil bu.
New Crop Marketing: Based on our most recent price projections, Dec corn futures are in a downward correction and estimated to find a bottom near the 3200-3300 level. Before Dec corn expiration futures are expected to work back towards 3800 with basis improving. End users and producers, use the preceding information to plan.
Old Crop Marketing: Recent high prices strained usage and as sales were made during the final stretch of plantings, they placed a strain on basis as well as futures. Now that futures and basis have weakened, we see this as an anticipated catalyst to spark increasing demand. Provided the present old crop-new crop spread to hold between 8-12 cents, look for a move to 3650-3700 vs the Sept futures to complete old crop marketings. Midwest cash average price is $3.05 per bushel. Cost of carry on farm is estimated at 3.4 cents per bushel per month. Unless your cash market is willing to pay you to store the crop, signals suggest it is time to move your old crop inventory. Allendale sold its cash corn crop on May, 31, 2007.