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Crop Prices to Remain in the Cellar?
Grains are cheap after the month of June, when we went from yearly highs to early lows.
Some market players sold millions of bushels of soybeans in the month of June, with relentless selling that didn’t even allow for a dead-cat bounce, which grains are so popularly known for. This seller seemed more intent on pushing soybean prices (and all grains) down than getting the best price for their long positions. Who could that player be?
With soybean prices $2 lower and corn 80¢ lower than last month, we now have a situation where U.S. soybeans are priced 20% lower than Brazilian soybeans! That $2 difference is interesting, as it’s very similar to the 25% tariff that has been imposed on U.S. soybeans (and none on Brazilian soybeans).
So we have market prices now near the lows of the year (and even multiple years), with prices basically in the cellar for now. The problem is that prices could very well stay in the cellar until something changes on the export lineup, or on the production lineup for U.S. crops.
It’s becoming more and more likely that U.S. crops in 2018 will not be a failure, and possibilities of threats to the crop are waning, as well. We are well into pollination of corn now in the U.S., and podding of the soybean crop has begun.
Still, we have mostly adequate soil moisture or better in most areas, and there doesn’t seem to be a threat of hot temperatures for any extended period at this point. So it’s becoming more likely every day that U.S. crops will be adequate or better in yield (for the fourth straight year). There is little threat of frost damage, as in spite of late planting, crops are now about seven to 10 days ahead of normal in nearly the entire U.S.
Weather forecasts are fairly stable in calling for above-normal temps for the next seven days in most of the U.S., with precip levels normal to above normal in a band from the four corners through Nebraska, Iowa, Illinois, Kentucky, and Tennessee. The rest of the U.S. will see below-normal precip the next seven days. The eight- to 14-day forecast is cooler, with mostly normal temps in the west and above-normal temps in the east.
Precip amounts are near normal in much of Iowa, Illinois, Colorado, and the southeast U.S. but below normal elsewhere. Temps cool to normal in the west, but still normal to above normal in the east. This is not a threatening forecast for most of the Midwest through pollination of corn.
Today’s rainfall is mostly limited to North Dakota and Minnesota, while the rest of the U.S. is dry, once again. There are areas that are getting dry after weeks of limited rainfall, and there will start to be stress and yield losses in those areas.
Crop progress reports came out yesterday, and mostly the crop conditions were relatively stable, with soybean conditions unchanged at 71% rated G/E and corn conditions down only 1% at 75% rated G/E.
Pro Ag yield models were higher for both crops, with corn gaining 0.92 bushel an acre to 176 bushels an acre, and soybeans up 0.218 bushel an acre to 48.74 bushels an acre. These are both bearish numbers and reverse the direction from last week’s decline.
Corn is now 37% silking, 19% ahead of normal. So, pollination is well under way. Soybeans are 47% blooming (20% ahead of normal). So, podding will quickly begin as well in half of the crop, with 11% currently setting pods (7% ahead).
Cotton is 59% squaring, 4% ahead of normal, and 21% setting bolls (6% ahead), with 41% rated G/E (down 2%) and well below last year’s 61% level. So, cotton is suffering a bit under the heat, with conditions rated low and declining.
Sorghum is 22% headed (3% behind), and 17% coloring (equal to normal), but ratings are also declining, down 2% this week to 51% rated G/E. Winter wheat is 63% harvested, 2% ahead of normal.
HRS wheat is 81% headed, 12% ahead of normal, and is rated 80% G/E (up 3% from last week).
Barley is 78% headed (5% ahead), and ratings also rose 1% to 85% rated G/E.
Oats also are 91% headed (2% ahead), and 10% harvested (1% ahead), with ratings steady at 73% G/E. The small grain just keeps getting better this year after a horrible start, as rains continue to fall in these areas. Warmer than normal temps have pushed crops rapidly toward maturity, and sometimes that is not good for yields. But with adequate moisture, so far that is not showing up in crop ratings.
Soil moisture levels are down 3% topsoil to 70% this week rated adequate/surplus, with subsoil down 3% as well to 68% rated adequate/surplus.
But these levels are still similar to last year’s ratings.
Overall, the crop is still essentially an above-average crop in corn, soybeans, and most small grains so prices continue to sag as we continue to have trade disputes with many export customers, none more important than China, where we sell about one third of our soybean crop, by far our largest bean export customer.
Until new developments occur on that front, we may see prices remain in the cellar for an extended period of time.
Ray Grabanski can be reached at firstname.lastname@example.org.
Ray Grabanski is President of Progressive Ag Marketing, Inc., the top-ranked marketing firm in the country the past 8 years.
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