Corn trade moved to contract highs as crop conditions continue to decline, and forecasts continue to be poor. Outside markets have also added more of a risk scenario. September futures were 68 higher on the week, and the December was up 62 cents. Over the past two weeks December corn rallied $2.00, less than two weeks ago traded 6 cents above the contract low, then just before the fourth we printed a new high. Forecast moisture has not been materializing the past month, so trade should stay active and on edge. Old crop corn has worked higher on the board, but basis has been softening as ethanol usage backs off substantially due to negative margins.
Exports have also been very quiet; 120,000 metric tons of new crop were announced as sold to Mexico. Full exports were announced at 153,000 metric tons. Inspections slid 8 million bushels week on week to 22 million bushels. Crude prices continue to trade around our yearly lows, which is below $80 a barrel. The lower energy prices coupled with the run up in corn has ethanol margins around the worst spot we’ve seen. The USDA released the June 1 Quarterly Stocks and the June Planting Intentions number on Friday morning June 29. Planted acres were 96.4 million, 500,000 above the expected range, and 4.5 million higher than last year. The June 1 stocks came in at 3.14 billion bushels, vs. an average guess of 3.18 million bushels. A year ago we were at 3.67 billion. On the Monday afternoon crop conditions report there was an 8 percent decline to 48 percent good to excellent. This is a 29 percent drop over the last six weeks.
Conditions in the central-east Corn Belt have declined faster adding to worries; and the best hopes for rains are a few days away. If they do not materialize and it stays hot, the trade should continue to try for higher levels in the week ahead. The question to answer here is with the poor ethanol margins at these corn prices ration more usage than the expected production short fall due to our hot dry June? On the December chart the $7.40 area may contain things a bit, while $6.87 and $6.74 become support for now. Hedgers call with questions. If you are debating your hedging strategy after this very nice upside run, give us a call to assist.
Soybean trade moved higher with the risk on trade and deteriorating crop conditions. August beans were 86 higher for the week, and November beans were 80 higher. Meal was $31 higher, and oil was 115 points higher. Crop conditions dropped 8 percent to 46 percent good to excellent on Monday which is the lowest rating for this time of year since 1988. As long as beans see some moisture they should hold on well and wait for the important August weather and poor weather there will likely be the real show. The stocks and acreage reports were not that important considering our serious hot dry U.S. scenario right now. The market may decide that the low to mid $15 range has added enough weather premium for now, and we’ll stay here for another week and then react to the forecasts. The higher prices, and some moisture this week, should prompt double crop acres behind the wheat harvest. The risk reward points toward giving it a shot, even if it is a little dry. Friday’s report placed acres at 76.1 million acres, 200,000 more than expected. Stocks were 667 million, 27 million more than expected. The bear argument will need Midwest Moisture and then big planting intentions on Friday and for Argentina and Brazil at the end of the year. The USDA announced 1.75 million metric tons of soybean sales this week. Demand still looks very strong. We are at the contract highs, the funds are already big longs, demand remains good and the supply side is set up for a disaster without good Midwest rains the next 60 days. Hedgers call with questions.
Wheat trade has followed the row crops higher with support from fund buying and Russian weather. The July contract weekly net changes are 47 higher in Chicago, 52 higher in Kansas City and 65 higher in Minneapolis. Winter wheat harvest is now 69 percent complete. Spring wheat conditions fell 6 percent to 71 percent good to excellent, and the crop continues to develop well ahead of normal.
Nearly three quarters of the spring wheat is now headed. There are some concerns about the spring wheat crop with elevated heat in the Northern Plains, but so far no major problems have been reported. Canada is in good shape weather wise, with ample moisture and increased acres. Former Soviet Union production still has less than ideal weather but has gotten some showers. Australian estimates are starting to move lower on the expected shift to El Niño later this year.
Wheat exports were okay at 418,500 metric tons after the strength of the U.S. dollar has eroded the U.S. price advantage in the near term, and the conclusion of harvest has the Middle Eastern importers sitting on adequate supplies for the moment. Egypt cut their wheat import budget as well. The acreage numbers are not as important for wheat on Friday other than spring wheat. The average trade guess for total wheat acres was at 56.85 million, and came in at 56.2 million. Spring wheat was lower than expected out that number, supporting the Minneapolis crop. What June 1 stocks were expected to be at 726 million, and came in at 743 million. This would be the old crop carryover number; a year ago we were at 862 million. Hedgers call with questions. Make sure you are looking at 2013 prices on this rally to start a program for next year.
Information contained herein is based on what is believed to be the most reliable resources available at the time of publication. Trading commodity futures or options involves risk, and past performance doesn’t indicate future results.
David Fiala is president and chief analyst for FuturesOne, a risk management and futures brokerage firm in Lincoln, Neb. He can be reached at 800-488-5121 or email@example.com.