The summer solstice is fast approaching, marking the official start of summer and the end of spring, a spring that has wiped out the years of drought that has affected much of the Western Corn Belt.
According to the latest Drought Monitor report, less than 3 percent of corn growing areas are currently experiencing drought, while the amount of the nation’s soybean growing area affected by drought has fallen to 2 percent.
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This drought relief measure includes: Side effectsFor example, parts of the Midwest are experiencing agricultural problems, with excessive moisture causing flooding and making it impossible to grow corn and soybeans.
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at the same time, Eastern Corn Belt is drying out The region is experiencing record heat and limited rainfall, and after a wet spring, is now rated as abnormally dry.
Courtesy of the U.S. Drought Monitor.
Latest predictions A heat dome that has formed in the eastern part of the country is expected to retreat westward during the last week of June, increasing the chances of rain and cooler temperatures in the eastern corn belt. Long-range maps continue to predict a return of heat in July, which could cause problems with pollination if hot days and warm nights materialize as some forecasts suggest.
Weather impacts basis and spreads
Heavy rains in the northern Corn Belt affected spreads and basis in corn and soybean markets.
The Upper Mississippi River Basin is experiencing river level challenges due to excessive rainfall. This has limited barge loading capacity and corn loading has nearly halted as of last week as barges opted for soybeans due to limited working conditions. Based on spreads and the CIF market, this situation remains the same.
Rain is expected to continue in the region for the foreseeable future.Historically, corn loads average 33% this time of year at Lock 15 near the Quad Cities, while soybean loads in the region average 33%-50%.
While there are fewer corn vessels in the Gulf of Mexico vessel lineup and no corn-only vessels in the lineup, ADM still has a few combo vessels loaded with corn bound for Caribbean and Latin American countries.
Despite a shortage of vessels in the Gulf of Mexico, the U.S. remains competitive in the corn business as Brazil’s harvest continues, with prices there holding steady since last week and running above year-ago levels.
Meanwhile, Brazil continues to focus on soybean production, Ukraine is virtually depleted of stocks and Argentina is backlogged with loadings through July.
Possible weather premium
For those with unpriced grain (both new and old), the price volatility over the past few weeks has undoubtedly been frustrating as prices have fallen to spring lows. With most of the growing season still ahead, adding some weather premium makes sense.
The latest National Weather Service forecast for July has most of the Corn Belt seeing above-normal temperatures and below-normal precipitation. As for the cash corn market, the base continues to trend strong as farmers are still pulling back from selling due to recent price volatility. So, if you have any unsold bushels, be sure to let your cash grain buyers know; it may help boost the base.
Courtesy of NOAA/National Weather Service
Use Weather Rally
We are encouraging producers to take advantage of the potential for improved weather to sell or at least implement price protections for any unsold old and new crop bushels. Estimates suggest that approximately 77% of old crop corn has yet to be sold and only 9% of the expected new crop has been sold.
With U.S. corn inventories exceeding 2 billion bushels and no significant production losses expected, prices will likely be closer to $4 instead of $5 by fall.
Similar to the corn market, we believe the rebound in soybean prices since recent prices is an opportunity to sell unsold old and new crop bushels.
Extreme movements expected next week
Reports show that about 81% of the old soybeans are on the market, compared with only 7% of the new crop.The new crop balance sheet projects ending stocks to swell to 445 million bushels, despite a 125 million bushel increase in demand (which seems unrealistic at the moment due to the lack of Chinese purchases), and fall lows are likely to be closer to the $10 price level rather than the $12 where July futures are currently trading.
The USDA will release its quarterly grain inventory report and acreage survey next week on June 28. Trade reaction reports have historically tended to produce extreme gains and losses, so you should have your offers ready to take advantage of any extreme movements that may occur.
If you have any questions or would like specific advice regarding your business, please contact us directly at 815-665-0461 or call 844-4AGMRKT to speak to a member of the AgMarket.Net team.
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