Weather indicates big crop, mixed blessing

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Corn field

Grain farming is a mixed bag right now. It is hard to get everything we want, because they are in conflict. What we want is great prices and a great crop. One out of two is not bad, but it is hard to take.

The trade gets one more set of good, hard fundamental numbers July 12 in the form of the world Supply and Demand and Crop Production Reports from USDA. They were released at noon, July 12, and were generally not expected to be good for prices.

Regardless of what improvement they report, the market has traded so low as we go into them that we could rebound, even from a bearish report.

Trading low

How did we get to this point? Grain farmers got one short chance to price last year’s and this year’s crops. That chance did not look good enough, and most of them are sitting on too much of the last crop.

Now, we have seen a precipitous decline in prices, but it is for a reason that should have them smiling. Prices are cheap because the new crop looks so good.

Weather worries

Planting was delayed in most areas, but the weather allowed catch-up.

We saw fears of dry weather, but most areas got enough rain. Forecast even during the rain events pointed to hot weather ahead, but now we are tasseling and most of the Corn Belt is not suffering for rain during this most critical period.

Record conditions

All this now has us looking at record projections for corn condition and near-record soybean conditions. That has us looking at record corn production projections, which would lead to burdensome carryout. The carryout leads us to cheap price projections.

We are walking the statistical road to cheap prices right now, and it does not feel good, even while walking the fields feels great. Let’s look at the best ideas we have of what those numbers will be.

Report

The Crop Progress Report gives us corn up a percent to 76 percent good and excellent conditions.

That helps traders anticipate that corn production will come in at 14.525 billion bushels. That would be a new record, and is twice what we produced in our biggest year in the early 70s when I was getting started in this business.

That would yield a carryout at the end of the marketing year of 2.205 billion bushels. It is the carryout that has the market spooked. Two billion is seen as extremely burdensome. More than that is a disaster to prices, and has been over the last month.

Soybeans present a similar situation, although the market is sensitive to later weather in the case of beans. The Crop Progress Report puts the beans at 71 percent good and excellent, also up one percent.

Traders look for a crop of 3.867 billion bushels and a carryout of 287 million bushels. With good August weather, those numbers could actually get bigger.

Not created equal

As usual, all farms are not created equal. There are areas of stress where farmers are worried about drought and cheap prices at the same time.

In any record year there are places where the crops are not great, and this year that place is in northcentral Ohio and over into parts of northwest Ohio.

Prices still low

As our production picture has improved, our prices have not. December corn futures have declined over a dollar, from the 4.49 of mid-June to the 3.46 we had July 6.

Farmers traditionally look for the high price for the year to be near the fourth of July. This year they got the low.

We have now recovered just 71⁄2 cents off the low as of July 12. We are actually 2 cents lower for the day, July 12, at 3.531⁄2 December futures.

The soybeans are similarly a huge bust for the last few weeks. November futures lost $1.651⁄4 from the June 13 high of 11.861⁄4 to the low July 8 at 10.21. Here we have bounced a third of a buck, to the 10.531⁄2 we see July 12, but that is down 11⁄2 cents for the day.

Although I have some hope for a little recovery into this report, simply because we have been so low, it is discouraging that we are actually lower on corn, beans, and wheat.

I would be more comfortable if we were actually anticipating higher prices.

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Marlin Clark is an associate of Russell Consulting Group, with a local office in Williamsfield, Ohio. Comments are welcome at 440-363-1803.

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