The USDA report Friday was mixed. Increased U.S. demand for corn and soybeans was supportive. Higher production and higher ending stocks were a negative for wheat.
Corn ending stocks were reduced 95 million bushels for old crop, new crop ending stocks went down 145 million bushels. The yield remained the same for new crop at 168 bushels per acre. While the corn numbers could be viewed friendly the market action following the report did very little. Before the report corn was up 1 cent. In the minutes that followed the noon release, corn did manage to be up 10 cents. Those gains were not holding at 12:25 with corn down 4 cents.
Soybeans could be considered a touch friendly. However, like corn the early gains did not hold. Before the report soybeans were up 12-14 cents. After the report they did breach the $12 mark on the July CBOT as they reached $12.08. Not holding the $12 would be a negative. Again the soybeans could not hold those gains. On the days’ high they were up 32 cents in the July and up 32 in the November. Soybean ending stocks were lowered in the old crop by 30 million bushels to 370 million bushels. New crop soybean ending stocks came out at 260 million bushels, down 45 million bushels. Soybean production was lowered 2 million tons in Brazil to 97 million tons, no surprise there. Argentina production did not change. That is a small surprise with production pegged at 56.5 million tons. At 12:25 soybeans were down 3 cents for old and up 2 cents for new soybeans.
Wheat was considered negative with production above expectations for US wheat. Ending stocks also increased. A 12:25 wheat was down 12 cents. Prior to the report wheat was down 7 cents. July CBOT wheat needs to hold the $5 level if it is going to push through the strong resistance at $5.30 to $5.34.
Today’s USDA report contains a multitude of numbers for corn, soybeans, and wheat. Numbers for the US and the rest of the world were released. With those numbers there is always a bias of which might be more important as well as the ones to ignore. Bottom line, while they provide fodder for market direction one item remains top in the minds of producers, traders, and market watchers. It boils down to weather. Now the weather to watch is in the U.S. growing regions, specifically the Midwest.
While you may have been surprised this past month with the strength and depth of the current rally, this thought remains. For a moment, take everything you have seen with prices through Friday, June 3. Price activity up to that date had nothing to do with U.S. weather. It was dependent on South America weather and demand. Just this week, U.S. weather has become a dominant feature for grain prices. In coming weeks and through July and August you will be hearing much about U.S. weather. You are about to be bombarded with a legion of forecasts. Typically there will be a morning, noon, and overnight forecast. Now throw in the US and European models. That means in the passing of 24 hours there could be six different forecasts. Adding to the forecast fury is the reality of many different weather forecasters, each with their own slant to what is about to happen. If your head is about to explode you are not on an island.
I was reminded this week that the European model is typically more accurate in dry conditions. Adding even more to the slurry of confusion surrounding weather reports is this typical comparison in the summer: How does the American model compare to the European model? Now once you throw all of these reports into the blender and what do you get? The reality that the forecasts are just that, forecasts. How quickly they change. Turn the calendar back to the summer of 2012 and the drought that affected many Ohio producers. Rain was coming – it was just two days away. And when those two days are now today, it was as dry as a bone. But rain is still coming in just two days. Then the frustration sets when it remains dry week after week.
If the last month was a blur to you with all of the planting, spraying, and fieldwork taking place you are not alone. With the May 10 USDA supply and demand report, July CBOT corn closed at $3.18, up 10 ¾ cents. Last night July corn was $4.26 ½. On that same May 10 date, December CBOT corn was $3.87 ¾. Last night it was $4.33 ½. November CBOT soybeans on May 10 were $10.76, up 57 cents that day. Last night they closed at $11.52 ¾.
In case you thought we are seeing a bull market for soybeans, you are correct. Reuters reports that soybeans are poised to close higher for the 9th week in a row. This is the longest bullish stretch in 43 years. The “dome of doom” forecast was less than three months ago. At that time corn below $3 and soybeans near $7 seemed a real possibility according to some market watchers.
Midwest rains next week should be resistance for higher corn and soybean prices. Higher demand will be supportive for corn and soybeans. Next week we will see what wins — weather or demand.