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Analyst: Is This the Best Recovery We Should Expect?

Corn prices dropped sharply last week, going from a high of $4.49 December last Friday, June 17, to a low of $3.825 June 24 for a huge 67¢ drop in one week. That price decline indicated corn prices may have topped for the summer, but they have recovered quickly to above $4 so far this week. We may need a bit more recovery, though, to make additional corn sales. Soybeans have also bounced back nicely after sharp declines last week. In fact, November soybeans topped out at $11.86 on June 13, only to drop $1.04 to the low June 24 of $10.72. So we have seen a very sharp, precipitous decline in grain prices in the past week or two. That makes it important to sell a 33%, 50%, or 66% recovery if the corn and soybean market can muster one up.   

Weather forecasts for the U.S. look a little drier today, June 28, for the seven-day and the eight- to 14-day forecast, and that is providing a bit of spark in grain prices today. Also, temperatures will remain moderate for the next seven days, but then will warm up somewhat in the eight- to 14-day forecast. It’s getting close to the reproductive stage of crop development for corn and soybeans, a very important time for determining yields.  

Crop conditions yesterday indicated not much change from last week, with corn still at 75% rated G/E, and our Pro Ag yield model rising somewhat at 1.12 bu/acre this week to 168.7 bushels. Corn silking is 6% vs. 5% normally, reflecting the slightly earlier-than-normal planting progress. Soybean crop conditions were rated 72% G/E, down 1% from last week and vs. 63% last year at this time. However, the Pro Ag soybean yield model was up slightly at 46.4 bu/acre, up 0.16 bu/acre from last week. Soybeans are 95% emerged vs. 91% normally, and 9% blooming vs. 7% normally, so we are slightly ahead of normal progress.  

Winter wheat conditions also improved another 1% to 62% G/E vs. only 41% last year, with the yield model rising a more significant 0.45 bu/acre to 50.76 bu/acre, now a bit above the USDA projection of 50.5 bu/acre. So, the winter wheat model is reflecting that yields are probably better than expected among winter wheat harvesters. Winter wheat is 45% harvested vs. 41% normally, so that is also progressing at a good pace.  

Spring wheat is 56% headed vs. 27% normally, again reflecting the early planting. With conditions dropping 4% to 72% G/E, some areas are becoming too dry while others are becoming too wet. Barley conditions are 75% G/E, down 2% from last week and vs. 73% last year at this time.  

Topsoil moisture conditions declined nationally with 5% to 69% rated adequate/surplus, well below last year’s 83% rating, so the past week's dryness is having an impact on soil moisture. Subsoil moisture also depleted a bit last week, down 4% to 74% rated adequate/surplus vs. 83% last year at this time. There is a chance to rally if dry weather concerns reemerge this summer.   

Prices had risen over $3 in soybeans and 85¢ in corn over the past few months, making sales attractive again in late May/early June. Pro Ag advised buy, buy, buying this winter at the lows, and now finally we were advising selling some corn and soybeans in late May/early June. We do want to get some more sales made on the downside of this market as it appears the trend is changing to lower.  

Perhaps a 50% recovery is a good target, which would mean $11.34 November soybeans to make catch-up sales, and $4.15 December corn. These prices aren’​t as good as those we saw in mid-June, but perhaps this is all the recovery we can expect. In soybeans, we are right there in price as we await the June 30 USDA planted acreage report.  

Wheat has been a disappointment this year, with prices not fluctuating positively due to the large yielding winter wheat crop in 2016. The USDA is already projecting a record-shattering yield of winter wheat at 50.5 bu/acre, 2.7 bu/acre larger than any other winter wheat crop in U.S. history, so wheat prices haven’t given much opportunity to price anything this year. Perhaps after harvest prices can muster up some strength, but the U.S. dollar strength after the Brexit vote was somewhat devastating to wheat prices as we saw new lows in all three markets. If you have wheat that you’re forced to sell in this downturn, you may want to look for a way to own it back as prices are already very bad. 

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