All of the U.S. corn is now planted and weather is the main focus of the market until we are past the key yield development timeframe. Our key yield development timeframe will be July 4 through July 20, as the crop is most sensitive to weather.
Our summer month weather premium high has already been achieved by the market. The USDA is currently forecasting 2010 planted acres at 88.8 million, the second largest planted acreage since 1946, only behind 2007. Trendline yields are not a requirement, but with crop ratings as high as they are, trendline plus yields are almost guaranteed.
How low prices go are dependent on the commodity funds. Funds are currently net long 94,997 contracts, indicating they have lots of liquidating yet to do if they are to get out of all net long positions. Typically, funds exit longs during the third quarter of the year as the market trades lower into harvest, before funds buy into fresh longs in the last quarter of the year in hopes of a post harvest rally.
A threat of frost could force a short-covering rally, so be quick to change your marketing strategy if adverse weather threatens the Midwest.
The key pod-setting stage looks to begin about July 15 and last until Aug. 5, in which biggest gains in yields estimates can surface with timely rain or biggest upside gains in futures will occur if heat and dryness occurs.
Highs are usually in by July’s end, but highs have likely occurred in early June unless threatening weather develops during the podsetting stage that will reduce yields and drive prices higher.
With volatility extremely high, this is a high-risk weather market. Rain events that occur in late July and the first week of August should be sold as this will help the development of the crop. The USDA recently forecasted seeded acres at 78.1 million, the largest seeded crop in history.
It is interesting to note that November soybeans have only closed above $7 on Nov. 1 in six of the last 24 years, however this year’s price of November soybeans is well above that level.
Funds are still net long over 43,921 contracts, less than half of the net long amount they held last year. Funds typically liquidate longs after the podsetting stage is completed.
Corn closed the week $.20 1/4 lower. Last week’s crop progress report showed national good-to-excellent ratings were 75 percent, 2 percent lower compared to a week ago.
Iowa is rated 75 percent g/e, Nebraska 78 percent, Minnesota 94 percent, Illinois 69 percent and Indiana at 75 percent.
Only 7 percent of the crop is rated either poor or very poor. Last year’s ratings were 70 percent g/e and only 7 percent p/vp. The big question is, can ratings hold these levels during the growing season?
The weekly export sales report showed net sales of 1,123,400 metric for delivery in 2009/10 were up 3 percent from the previous week and 35 percent from the prior four-week average.This year’s export profile is now at 1.892 billion bushels versus the USDA forecast of 1.950 bb. With the crop the highest rated in over 30 years and seasonal highs forming in corn and soybeans, the possibility of a sharp drop in corn values seems strong.
The USDA is likely to lower feed usage in the quarterly stocks report, combine that with a record large crop and ending stocks could easily swell to over 2 bb.
This is especially bearish with the weak overseas economies. Seasonally, corn has sold off from June 18 through July 27, 13 of the last 15 years and average of 44 cents.
Soybeans closed the week $.04 lower from last week. Last week, the USDA reported a 120,000 mts soybean sale to China. May Census soybean crush was reported at 133.8 million bushels, in line with market expectations of 133.2 million (132.5-134.5 million range of ideas) and was down slightly from April crush of 136.5 million and was down 8.5 percent from last year’s May crush of 146.2 million. Crush of 133.8 million bushels was the lowest May crush of the last five years. Marketing year-to-date crush is now at 1.366 bb, up 7.3 percent from last year with three months in the year to go.
To reach the USDA’s 2009/10 crush estimate of 1.74 bb crush during the June-August period needs to average a 4 percent decline from last year.
The USDA reported crop ratings of 69 percent g/e, down 4 percent from last week. Iowa is rated 69 percent g/e, Illinois at 62 percent, Indiana 68 percent, Minnesota 89 percent and Nebraska at 75 percent. Only 8 percent of the crop is rated poor to very poor. Last year, 67 percent of the crop was rated g/e and 6 percent was rated p/vp.
The weekly export sales report showed net sales of 308,300 mt for delivery in 2009/10 were down noticeably from the previous week, but up noticeably from the prior four-week average. This years export profile remains well ahead of last year’s record pace at 1.434 bb versus the USDA forecast of 1.455 bb.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.
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