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Wet weather rally continues
The “wet weather” rally continued this week as more and more farmers sat down at their desks to put pencil to paper and make decisions regarding the fate of their unplanted acres.
Most of the corn planting concern centers on Iowa and Minnesota. North Dakota, Kansas, Kentucky, and Wisconsin are also lagging. Some of this can be offset by the fact that several states in the eastern Corn Belt have had smooth sailing during planting -- Indiana, Ohio, Michigan, and Pennsylvania.
Market participants spend time throwing out reductions in planted acreage (there are many in the 2.5 to 3 million-acre range). Thursday’s price action, however, suggests a pause in the action -- until the next forecast or a shift in acreage expectations. Plus everything has shifted in this holiday-shortened week. Ethanol production was released today (863,000 barrels/day vs. 875,000 last week) and export sales will be issued Friday.
Meanwhile, there are indications that the cash grain markets are making the transition from elevated old-crop prices to lower new-crop prices. First, soybean processors have been able to buy adequate supplies for crushing in the past 10 days. This has caused basis levels to collapse and bids have switched to being off the August or November contracts. This is quite a change from early May when many crushers were having trouble obtaining pipeline supplies. The spread between the July and November bean contracts narrowed as well.
Basis levels for corn have been a bit more mixed while the spread between July and December has collapsed. Still, it is not as dramatic as beans. The old-crop corn market may hold up better since it is still another month until the June 28 Grain Stocks report, which will provide the market with feed use data.
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