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Weather, yield questions remain
This is the time of year when the most pressing questions revolve around weather and yields. This year is no exception.
The spell of dry weather and blistering heat, especially in the western Corn Belt, is forecast to come to an end. The problem for the market is that much of this rain/pattern change will come over the weekend. Traders probably are not happy with this timing, but they have dealt with this situation a few times this spring and summer. Actual rainfall totals and the forecast could make for interesting trading on Sunday night.
The market continues to realize corn crop size may not be as much of an issue as bean crop size.
Last year’s very small corn crop limited demand and forced end users to find substitutes or other sources of corn. So, for example, other countries have sold corn at cheaper prices to Japan and other formerly staunch U.S. customers. It will be hard to get these customers back.
Lower demand means a sizable corn crop will have plenty to slosh over to the carryout line on the supply/demand tables. The market perceives that, in the summer of 2014, carryouts in the 600 to 700 million-bushel range will be a thing of the past.
For the beans, the market understands the situation could be different. Right now, the USDA is using a robust 44.5-bushel yield. Put that down 2 bushels at 42.5, and things get interesting. Given the USDA’s robust demand, carryout could end up looking similar to this year.
Considering the importance of August weather for soybeans, it is hard for the market to get a handle on yields. This keeps the new-crop soybean price in much more of a sideways trend until there is more information on weather and yields.
The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.