The grain markets are called weaker this a.m. behind a very weak overnight session. The weakness in the overnight session coming via weather forecasts that show below normal precipitation in the deferred forecasts.
In the overnight session corn ended down 17-19 cents, KC wheat was off 12 cents, MPLS wheat was down 7 cents a bushel, CBOT wheat was off 12-13 cents, and soybeans were off 3-9 cents a bushel. Outside markets are choppy with the US dollar near unchanged with the cash index at 82.18, crude is down 30 cents a barrel, equity futures are pointing towards a choppy slightly firmer opening, and gold is up 7 bucks an ounce.
The main thing for the weakness seems to be the 6-10 and 8-14 day forecast that have below normal precipitation for the heart of the corn belt. Many of the bulls will argue that we are very far behind and those deferred forecasts tend to change all the time. They are correct you can’t exactly write in stone what a forecast is out a week. Heck you can’t exactly write in stone a forecast for a few hours from now.
But what some in the market are looking at is the window is opening. This afternoon we will have a planting progress update and I have seen estimates of 10-20 % corn planted with most in the 12-15% range. The other thing that the bulls are pointing too is the fact that much of the corn belt just got hit with moisture and could get hit with a little more over the next few days.
Bottom line is when we look at weather we can see both positive and negative; but the focus today or at least this a.m. is for the deferred forecasts that indicate a planting window will happen for much of the corn belt and at the end of the day we need moisture to make grain and that has happened for much of the area to the east of us. Hopefully some of that moisture will spill over to our area in the coming weeks.
One thing that the late start for planting should do is give some support to corn in the summer. The past couple of years we have had tight balance sheets that ended up getting “saved” via the early new crop. Long way to tell how the crop develops but as it sit’s right now we have a later harvest then a year ago. So the question becomes will all of the areas have enough corn in that Aug-early October time slot?
This a.m. we will have export shipments out and this afternoon brings the crop progress/condition report. Otherwise we should really watch the forecasts; if the deferred forecasts indicate a halt to planting you cannot rule out a complete turnaround in our markets. But longer term we need to realize that if the present weather doesn’t take off some yield or acres our production prospects indicate that we will need to find demand. Perhaps more than has ever been done on a year over year basis.
Friday will give us our first look at the new crop balance sheets as well as updates on the old crop balance sheets. Perhaps this is also were some of the weakness is coming from.
Average estimates that I have seen call for 2013/2014 corn carryout of a hair over 2 billion bushels versus the present 757 million bushels that we have forecasted for this month.
13/14 wheat carryout estimate via the trade is at 657 million bushels versus the 731 we presently have in this marketing year.
Soybeans are pegged at 239 million bushel carryout next year versus the present 125 million that we have in this marketing year.
Overall not much changes are forecasted for the old crop balance sheets for any of the three major grains. While world supplies are also pegged bigger for all three of the grains next year.
Now to decrease the carryout’s one of two things need to happen. We need to increase demand or decrease supply. We also need to keep in mind that the USDA has a history of automatically doing one or the other to help balance. Keep in mind that despite our severe drought last year the USDA only printed so tight of balance sheets. It will be the markets job to find demand or decrease supply.
Softer prices in theory help demand and they also lead to decreased supply; but on the supply side of things look at your own operations. Just because we have softer prices do you try to now raise less? I don’t know of many that do or choose not to plant because prices are soft. Mother nature seems to control the supply side of the equation; at least in the United States.
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