Grain markets have multiple focus points in August, as we continue to discover the size of the crop and the appropriate future prices of individual grains.
The U.S. Department of Agriculture’s supply and demand report, out Aug. 12, will dominate thinking for a brief moment after its release.
One would expect traders to be looking at the yields reported, but the fact is that USDA now waits until September to do actual field tests, so the yields reported are suspect.
Market guessing
That gets us to the market guessing what the USDA will report, not necessarily what the crop actually is. Right now guesses range from 170 bpa to 180 bpa, so we could see some price changes depending upon what is real and what USDA reports for now.
It is hard to believe that we could have 180 bpa for corn, or better, given the drought stress we have observed for months. Nevertheless, the feeling now is that most of the critical areas of the main Corn Belt have gotten just-in-time rains, and the trend-line yields are still possible.
The Northwest Corn Belt remains dry, but with a little rain here and there to tempt traders into thinking it is not as bad as it really is. Much of the Eastern Corn Belt still expects big yields that may make up for the Dakotas.
Locally, the beans that had lost color due to excessive rains have mostly greened out again, although that process has slowed growth.
Ending well
We are going into the end of the summer in great shape here. The weekly USDA crop progress report made interesting reading Aug. 9. The U.S. corn crop actually gained 2% in the condition report, while the trade expected it to remain the same.
The “I” states lead the report, with Illinois 78% good and excellent, and Illinois at 70%, Iowa, with spotty rains, lags at 60% Ohio is one of the leading states, with 73% reported to be good and excellent in condition. The nation as a whole is only at 60% good and excellent, the same as last week.
Last year at this time the nation was at 74%.
Ohio’s soybeans lead the nation in condition for a major state, with 80% good and excellent. Pennsylvania is actually the best state, at an amazing 88%, but is not a big player in production.
The nation is at 64%, up from the 62% of last week. North Dakota, the driest state, is at 17%, with only 1% excellent. That 1% must have been under a couple of rare showers.
Looking at prices, December corn futures were up 111⁄2 cents for the week, while November soybean futures were down 121⁄2 cents. I make no conclusions from these price changes as they are just noisy background to the current volatile markets.
December corn futures were down 23⁄4 cents the morning of Aug. 10, trading at $5.51. That is long way from the May high of $6.38, and reflects the current view that we are having a big crop.
We have been sideways in a narrow range for several weeks, and that range is getting smaller, looking for fundamental news. That will come in the form of crop size projection from the USDA for the moment.
Exports slipped
It is notable that exports have slipped below what would finish USDA projections for the year, which end in August. Part of that is because exporters are having trouble sourcing corn.
November soybean futures were trading up nine cents the morning of Aug. 10, at $13.383⁄4. That is also a long way from the high of $14.80 made in June.
Remember, August is the critical month for soybean growth, so the party may not be over in the bean markets.
Wheat worldwide has been a problem this summer, with our spring crop posting horrible yields with low acres. This week comes the news that Ukraine is having a great crop, up 14% from last year. They are a major exporter that dominates prices in Europe and the Mid-East, so this matters.
Chicago wheat futures are now $7.181⁄2 for September, up seven and a quarter cents on the day so far. The contract high was back in May at $7.671⁄2, but this move the last few days is the highest price since the break in late May.
