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BRIAN HOOPS

By Staff | Jun 7, 2013

CORN

During June, the outlook for prices is simple as weather and how it impacts the emerging crops will be 95 percent of the pricing movement.

The only other supply side news the market will deal with is the June 12 USDA monthly supply/demand crop report.

Last month’s report put the ending stocks report for the 2013/14 crop at 2.04 billion bushels. This was mildly bearish to the market as this ending stocks figure was well above trade estimates.

That ending stocks figure will likely be the largest ending stocks of the year as late-planted corn and a likely reduction in planted acres will limit the downside price risk unless the U.S. produces an above-trend line yield.The trade should anticipate a slightly bullish report with yield and ending stocks reductions from May. Expect some buying ahead of the report release on the morning of June 12.

The market will want to be bullish as the key pollination time period is directly ahead of the market, however, it will take weather concerns during June to continue the rally.

Producers will want to use options as a way to manage risk and provide price insurance. This will enable producers to make sales and cover the upside if weather is adverse. The end of the month will also have the quarterly stocks and planting intentions report from the USDA. This report could be a shocker to the market as some reports have farmers decreasing seeded acres from the last report in March due to some farmers replanting in the Midwest.

Seasonal highs are usually formed by June 23.

SOYBEANS

The month of June looks to be similar to corn as we are in a weather market and weather forecasts will be the primary driving force. The soybean seeding pace is slow due to the wet spring.

Normally, there should be approximately 25 percent to 30 percent of the crop yet to be seeded, but this year there is nearly 40 percent of the crop to be seeded as of the first of June.

The crop looks to be seeded before June 15 leaving beans to spend the rest of June developing its root system. Rains after June 15 will be viewed as beneficial to crop development and negative for prices.

However, dryness in the month of June will send prices sharply higher. Demand has remained strong for U.S. beans as China has returned as a strong buyer of U.S. soybeans for this fall. For new crop, the USDA forecasted ending stocks at a more comfortable 265 mmillion bushels, but this figure looks to shrink in the June supply/ demand reprot.

Like the corn market, producers should use options as a risk management tool and price insurance. The month of June is not the key reproductive month for soybeans, however, the market will be quick to add a premium into prices on less than ideal weather.

The acreage report at the end of the month could be a shocker to the trade. The market has already anticipated larger seeded acres than this spring, however the market is also factoring in smaller yield figures due to the late-planted beans.

Seasonal highs are usually formed by June 23.

CORN ANALYSIS

Corn closed the week $.04 3/4 higher. Last week, private exporters did not announce any private sales.

In the weekly export sales report, old corn sales were only 3.4 mb, below the 8.2 mb needed each week to reach the lowered USDA export forecast of 750 mb.

Last week, the USDA corn planting at 86 percent, slightly behind the average pace of 90 percent. Emergence is at 54 percent vsersus 67 percent on average.

Plantings in Texas is 95 percent and Missouri is 83 percent complete, with key growing states of Iowa at 85 percent, Indiana at 86 percent, Illinois 89 percent and Nebraska at 96 percent complete.

Corn is finding mild support from wet and cool weather forecasts that are limiting the last of the corn seedings and slowing emergence. Corn is close to resistance of the March and April highs.

A close above these highs would be technically bullish for the market and attractive to fund buyers. If the stock market has topped and funds begin to liquidate their holdings, look for the grains to attract some of the fund money.

Strategy and outlook: Producers are now 100 percent of 2012/13 crop and are also 40 percent sold of the 2013/14 crop. Sell 10 percent of the 2013/14 crop at $5.80 March.

Producers re-owned 50 percent of the 2012/13 corn crop with July calls. Producers own December corn puts on 50 percent of 2013 production.

SOYBEANS ANALYSIS

Soybeans closed the week $.33 3/4 higher from last week. Last week, private exporters reported sales of 240,000 metric tons of U.S. soybeans sold to China for the 2013-14 marketing year; a cancelation of a sale of 147,000 mt of soybeans to China for the 2012/13 marketing year and 30,000 mt of bean oil sold to Germany.

In the weekly export sales report, old crop soybean sales cancelations of 4 mb, below the 3.8 mb needed each week to reach the USDA forecast of 1.350 bb.

New sales were strong at 31.1 mb. Soybean plantings are at 44 percent complete versus 87 percent last year and 61 percent on average.

Iowa is 40 percent planted with Nebraska at 63 percent, Minnesota 42 percent, Illinois 40 percent and Indiana 60 percent planted.

Soybean emergence is also slow with the report only showing 14 percent emergence.

The soybean crop will need sunshine and warmer temperatures. There is talk of soybean acres being switched from corn, which would add to the bearish new crop profile if a large U.S. soybean crop is raised.

Strategy and outlook: Producers are 100 percent sold of the 2012/13 production and are 40 percent sold of 2013/14. They re-owned 50 percent of 2012/13 production with July soybean calls. Producers own November puts on 50 percent of 2013 production.

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. He can be contacted at 605-660-1155.

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