This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Corn and soybeans are trading in a full blown weather market as we quickly approach the USDA Planted Acreage and Quarterly Stocks report that comes out this Friday June 28th at 12 noon eastern. These are some of the most important USDA reports of the year because one of them sets the planted acreage that USDA will use for the rest of the growing season and the stocks report shows if any adjustments need to be made on the demand side of the balance sheet for the old crop in the bin. If demand needs to be adjusted up or down it will be added or taken away from the carry in which will have implications for the new crop balance sheet as well. The bulls desperately need some help from USDA on at least one of these reports. The crop got planted and USDA has been reporting above average condition ratings so far in the growing season so the bears have had the upper hand so far. The funds have aggressively sold both corn and beans rebuilding their large short positions and pushed the new crop contracts even below the February lows.
This is not to say there are not major threats to production. Much of the western corn belt has been way too wet and a lot of flooding was reported from the additional rains that fell over the weekend. Meanwhile parts of Illinois, Indiana and Ohio have been drying out but some parts picked up some moisture over the weekend. Corn was down double digits at one point on Monday and beans were down as much as 5 but the market started taking note of the damage caused by the excessive rains and flooding. Until now, the market had been trading the adage that rain makes grain. It seems to be finally taking note that there are some issues with too much water in parts of the major production regions. The market is trying to price in the damage done and also the weather going forward and that leads to a very volatile market. Northern hemisphere weather is notoriously hard to model in the long term and with the setup of the atmosphere this summer is no exception. The market will continue to be closely watching each model run looking for trends.
USDA reported the US corn crop at 69% good/excellent which is what the market was expecting. That is down 3 points from last week’s 72% but much higher than last year’s 50% good/excellent on this date. Soybeans also dropped 3 points from last week to 67% good/excellent. That is compared to 51% last year. Cotton was up 2 points to 56% good/excellent compared to 49% last year. Winter wheat harvest was reported at 40% complete which is well ahead of the average of 25%. Harvest pressure has weighed on wheat despite production problems elsewhere in the world. In addition to the weather models, the market is going to be staying closely tuned to how these condition ratings trend.