By Doug Tenney, Leist Mercantile
U.S. weather continues to see odd occurrences this growing season. Here’s a perfect example. The first week of June frost warnings took place in the northern regions of Michigan while at the same time the Dakotas were experiencing temperature extremes in the 90s. In addition, Canada’s forest fires in the far eastern part of the country pushed smoke into Ohio and other states as it moved from the east to the west, a very odd movement of wind directions, resulting in air quality conditions for central Ohio to reach red levels.
Grain prices detonated, roared, and exploded into life the second week of June with continuous weather forecasts of dry conditions in expanding areas of the U.S. Midwest. Grains were sharply higher on June 16 compared to the previous week, old corn up 36 cents, new corn up 67 cents, old soybeans up 80 cents, new soybeans up $1.38, with wheat up 58 cents.
The NOAA drought monitor map of June 13 indicated that 57% of U.S. corn and 51% of U.S. soybeans were considered to be experiencing drought conditions. The last U.S. drought was in 2012, a bad memory to producers in Ohio and the Midwest. In 2012, the U.S. corn yield dropped 32.5 bushels per acre or 20% from the first Supply and Demand Report (WASDE) for 2012 crops in May 2012 to the final production report for 2012 crops which was published in January 2013.
Currently, U.S. farmers’ percentage of new crop corn and new crop soybean sales as of early June were considerably below levels of past years. Opportunities are increasing with the price gains noted during the second week of June.
U.S. May National Oilseed Processors Association (NOPA) soybean crush was 178 million bushels, a new record for the month of May. NOPA is a trade association for U.S. soybean crushers consisting of 12 members represents 95% of the U.S. soybean crush. Implied crush for May is approximately 188 million bushels. U.S. soybean crush margins continue to be strong. Mid-June, soybean oil represented 42.6% of the value of the crushed products, soybean oil and soybean meal. That number was also a seven-month high.
It is impossible to forecast the high of the price surge in weather markets. We are indeed in a weather market at this time. The peak for prices usually happens when emotions and volatility are at their extreme. Have we reached that extreme yet? Here are some points to remember. Much of the growing season is yet to take place. Also, the funds are not holding large long speculative positions in the grains.
Here are some chart points for further reference. December CBOT 2023 corn has a high for 2023 at $6.11 with a low for 2023 at $4.90 ¾, the low of the first quarter for 2023 is $5.47 ½. The close on June 16 was $5.97 ½, a move of 50 cents or 9% above the first quarter low.
Further price examination reveals December corn had a first quarter low above $5 in 4 years before 2023. In those 4 years, prices peaked an average of 39% above the first quarter low. A similar look at November 2023 soybeans has a high for 2023 at $14.05 with a low for 2023 at $11.30 ½, the low of the 2023 first quarter was $12.47 ½.
The close on June 16 was $13.42 ¼, a move of 94 ¾ cents, or 7% above the first quarter low. November soybeans had a first quarter low above $12 in three years before 2023. In those three years, prices peaked an average of 18% above the first quarter low.
Expect wide daily price ranges for the grains with extreme price volatility into mid-August.
Thought for the day. “Start by starting.” – Meryl Streep.