Wild ride on the corn train


Traders, commercials, speculators and farmers have all had a wild ride on the corn train over the last 10 days. Prices were down 50 cents at one point last week.

We have seen a range of 72 1/2 cents in July corn futures in a little more than three weeks. The low was May 19 at $5.51 1/4. The high came June 12, at $6.23 3/4. For perspective, that would have been the range for a year when I was first in this business!

We actually came screaming back at the end of the week to finish only down three and three quarters cents for the week. As this was being written June 12, we came back an additional 19 cents on the July futures and almost 19 on the new crop December contract.

During the evening session June 12, the July futures were down three cents and the December were down two and a half.

We have actually had fundamental news to make price changes, but the fundamentals are both bearish and bullish. The market is trading the bullish, because that is about the drought that is spreading in the Midwest, and traders love to trade the fear of poor crops.

The negatives were in the U.S. Department of Agriculture’s WASDE report that showed poor exports and increases in carryout estimates. USDA now expects U.S. ending stocks to increase slightly from 1.417 billion bushels to 1.452 billion for the crop year ending 2023. They estimate the following year, our new crop, to increase, from 297.6 billion to 297.4 billion. Not much change, but in the wrong direction.

They increased the estimate of the new crop world carryout from 297.6 MMT to 297.4. The new crop carryout for the world went from 312.9 to 314.0 MMT.

Dry conditions

The perceived drought and the resultant crop conditions were driving the markets June 12 and will until we get widespread rain. In Ohio, we got good coverage June 11, with additional showers expected for June 12 and 13.

Generally we should get one to one and a half inches, which will salvage us from further damage after three weeks with no rain, unusual for Ohio this time of year. Most farmers report that the crops were planted in good conditions and have not shown severe stress, but the drought has to hurt.

On our conference call this week, the common comment was continued drought, with spotty rains of a few tenths. Officially, USDA says that the drought area has gone from 34% of the significant production areas for corn to 45%.

I had reported that I heard Nebraska pivots were working early, and that the areas the pivots missed (imagine a circle of irrigation in a square field) were in bad shape. The morning of June 13, I was told that the areas the pivots missed in Central Nebraska were dead.

It is early to be talking about large decreases in yield from current conditions. It is not too early to fret about the dry conditions, especially farther west. In Ohio, we normally get the rain we need.

The main Corn Belt is always shy rain and needs the soil to be full before the season starts and timely rains after that. We had areas of deep snow cover late in the north, but there has been little rain in those areas since the snow melt, so they are now dry.

In some areas, the soybeans are off to a poor start from being planted in the dry and still being dry. We normally don’t worry about soybeans until late July and August, but with a poor start we will never have a great crop.

So, the market will be driven by weather, no matter that USDA says we will increase carryout. Much of the increase is because our corn exports are lagging expectations, so we may have more left over. The last eight weeks of exports have been strong and over a million bushels a week, but we look to be short of the year’s projection.

Soybeans and wheat

Soybean exports have been firm, but we are doing better on new crop sales than old. The soybean traders are watching the South American harvest, that is lagging in Argentina at 87% complete. The crop there is half of normal, but the Brazilian crop, as we have been saying, is a record that more than makes up for it.

This is the time of year that we normally don’t sell to China, and our current sales are to places like Germany, even though China is still our largest customer on a yearly basis.

Chicago led the wheat markets higher, gaining almost 12 cents last week. We were up three and a half cents during the day June 12, then down two and a quarter at night. We were trading July futures at $6.31 1/2.

Wheat news is focusing on the poor bread crop and the continued great cookie crop. Foreign news is about the Ukraine crop hurting as much as 20% of yield from hot and dry weather, although I wonder how the Ukrainian farmer gets anything done.


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