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Carnage in corn and soybeans
It finally happened, cash markets for corn, soybeans and soymeal imploded. After weeks of intense rallying and relentless basis strength, the end-user apparently got enough to last until harvest and pulled the plug on cash bids. Imports of soybeans, corn and ethanol have alleviated the domestic shortages and now all they have to do is wait for new crop to arrive. For the week, corn lost 52 cents, soybeans were down 141 cents (177 off their early Monday high), while wheat was only down 14 cents on all three exchanges.
Weather conditions improved significantly this week as much cooler temps descended onto the Midwest and rain fell in many of the dry areas. That said, there were some key areas that did not receive much needed rains, notably large parts of Iowa and northern Illinois in addition to eastern South Dakota and southwest Minnesota.
These very important production states saw declines in crop condition ratings for both corn and soybeans and we had more reports of crop stress throughout the week. As we finish the pollination season for corn and enter the season for soybeans, those areas will definitely need to get some rain soon or yields will quickly decline. There is also increasing chatter about early frost concerns but the market will focus more on pollination for the moment.
The spring wheat tour took place this week, and no surprise they are estimating big production out of the Northern Plains (on what got planted). The tour estimated spring wheat yields at 44.9 bu/acre, about equal to last year, but 1.6 bu above the 5-year average. Durum estimates came in at 41.7 bu/acre, down .7 bu from last year. Spring wheat crop conditions did decline slightly last week but still continue to look good. Most of the concern now centers on potential early frost, which is more in play this year because of the late plantings.
Egypt bought another round of wheat, their third purchase this month. Once again, the business went to the Black Sea, split between Romania, Ukraine and Russia. It’s worth mentioning that Egypt asked Russia if they could delay payment of their last purchase of Russian wheat, underlining the challenge they’ve had with financing imports. It apparently didn’t bother Russia as they stepped up to sell Egypt yet more wheat. The good news is that Black Sea prices were higher than last week, pointing to a rising world price even as their own harvest rolls along.
Russian harvest is progressing to around 40% complete. So far, yields are higher than last year’s drought reduced crop, but are disappointing as they get into the Lower Volga and Ural regions. In addition to dry weather early in the growing season, they are also finding disease and pest damage along with lower than average protein content.
Europe is also well into their harvest with production estimates starting to increase. The last estimate of 141.6 MMT would be the third highest on record and 3 MMT above USDA’s latest estimate.
Even though the US missed out on another Egyptian sale, our export sales are still impressive with another week of higher than expected sales. China continues to buy our wheat with marketing year sales so far around 3 MMT. So far, export sales are running about 42%, far above the 32% normally reached at this point in the marketing year.
Despite the carnage in corn and soybeans this week, wheat held together remarkably well. The winter wheats appear to be finding good support at the early July lows while spring wheat continues to bleed lower as crop prospects improve. If the debacle in the row crops couldn’t push wheat lower, the odds are increasing that seasonal lows are being established and then the normal seasonal pattern would have wheat moving higher into early fall.
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