Good weather, neutral report, flat market

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soybean field

This is the time of year when price changes are common on the futures markets. We see some delayed planting from wet conditions, or condition changes from dry weather, or we get surprises in United States Department of Agriculture (USDA)numbers that affect the market.

Well, we have seen a little of each of these things, but markets are basically flat. The recent USDA supply and demand report, out June 11, saw some small corrections, but the report was viewed as neutral.

Interestingly, the market firmed up going into the report and held the small gains after the report. It is a positive sign when the market is stronger than the report, especially in a week that the large spec funds increased their short positions to a record level in corn futures.

Favorable weather

Weather across the corn belt has been favorable, if a bit cool. That is changing with warm weather moving in. Conditions have been a bit dry in places. Some participants on our June 15 conference call expressed the need for rain, but admitted it was better to be dry than be swamped out like last year.

After 100-degree temperatures in the upper Plains this week, they will be needing rain. Locally, we have been dry enough to get some traditionally swampy fields planted. Most farmers are side-dressing corn and spraying soybeans.

The crops look great, if still a little delayed. Corn is knee high by June 4 if it is planted in April and May is hot. Neither happened this year. USDA reported corn condition as of June 14 at 56% good and 15% excellent. This is off 4% from the week prior, probably because we are a little dry. Ohio was rated at 53 plus 10. Soybean condition for the country was rated 60 plus 12, while Ohio was at 53 plus 11.

USDA did not report corn planting, assuming it is done. Ohio and the U.S. were both estimated at 93% planted for soybeans.

Fertilizer decline

Those tracking fertilizer prices notice that they have mostly declined as this spring went on. Fertilizer wholesalers may have believed the USDA projections of 97 million planted corn acres. That has seen to be several million too high by many observers, and the declining prices would indicate that the sales of fertilizer did not hold up. Earlier we were told that there would be nitrogen shortages this year because of the acres, and we are not seeing that happen.

USDA small corrections in the supply and demand report included a resurvey of North Dakota farmers, who reported a loss of 46 million bushels of corn in that state. North Dakota, you remember, had delayed-planted corn that did not fully mature. It was left in the field, with extremely low test weight and high moisture.

All the states together reported a loss of 75 million bushels. This would have had more effect on the corn balance sheet, except USDA lowered the ethanol grind by a further 50 million bushels, offsetting much of the loss.

Many observers still think the projected grind is too low, with low test weight corn yielding less ethanol. The grind is mostly a function of the loss of gasoline consumption while we mostly stayed home the last three months. However, the energy experts say car traffic is back to 90% of normal, so we may have more ethanol used this year than projected.

Gas prices rebound

An interesting side note of the energy disruption caused by the COVID-19 mess is that gasoline prices rebounded fast. I am now seeing gas at $2.299 at the station where I paid $.949 a few weeks ago. Surprisingly, I am seeing diesel fuel at $2.599 at the same station. I am not sure why this is so, when the trucking industry has carried us during the virus.

Perhaps it has something to do with an adjusted cracking percentage. I do know that all trucking has not been booming. One local trucking concern just sold its trucks because it lost some backhauls, changing the cash flow dramatically.

Market watch

The soybean side of the USDA reports was neutral for soybeans, also, although the exports were reduced by 5 million bushels. We had a strong week on the markets, however. This market is seeing a struggle between those who believe the Chinese will fall far short of their treaty obligations, and those who are watching continuous small exports to China and thinking it will all add up in the end.

July corn futures were trading June 16 at $3.313⁄4, up two and a half cents. December corn futures were at $3.441⁄4, up almost 3 cents. The recent low was June 1 at $3.191⁄4. July soybean futures were trading at $8.711⁄2, after a low May 6 of $8.311⁄2.

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