The grain harvest looks good
The U.S. Department of Agriculture’s monthly supply and demand report issued Tuesday left unchanged its predictions for corn and soybean acres and yields, which had the effect of driving down corn prices but boosting soybeans.
The report Tuesday was the first issued since the Chicago Board of Trade’s expanded hours left trading open during a release time for a USDA report.
Previously, the report came at the beginning of a two-hour hiatus between overnight electronic trading and the beginning of open outcry trading in the Chicago pits.
The USDA Tuesday left unchanged its May forecast of a yield of 166 bushels per acre nationally on almost 96 million acres, the highest corn acres planted in the U.S. since 1937.
Similarly, forecasts for soybean acres of 74 million and a predicted yield of 44 bushels per acre were not changed.
The USDA said the world is growing more corn, which prompted it to reduce expected U.S. corn exports by 50 million bushels.
Iowa is the nation’s largest producer of corn and soybeans. Its yields tend to be about ten percent higher than the national averages. The 2011 corn and soybean crops generated $20 billion in cash to Iowa’s economy.
The Tuesday report was taken as bearish for corn, with July corn down 4 cents per bushel to $5.98 and new-crop December corn down 9 cents to $5.39 per bushel.
Conversely soybeans prices rose by 8 cents per bushel to $14.33 for the July contract and 6 cents per bushel to $13.37 for the new crop November contract.
The USDA forecast corn surplus stocks of 851 million bushels on Sept. 1 before the new harvest, a figure unchanged from its May report.
Des Moines commodity trader Don Roose said “with such a short time to react, the market focused on the ending stocks numbers and they were disappointing for corn, because many expected the surplus to be lower.”
But Roose said soybean stocks of 175 million bushels are “razor tight,” which drove up soybean prices.
Beyond this September, the USDA has forecast a rebuilding of corn surpluses based on what it expects to be a bumper harvest.
For the post harvest period, the USDA projected corn surpluses at a record 15.7 billion bushels, up 2.2 billion from 2011-’12.
Traders had expected the USDA to stick with its earlier projections, preferring to wait for the July report to see what impact any dry or hot weather might have on the corn crop as it passes through its pollination stage in the first two weeks of July.
The report comes a day after the USDA reported that two-thirds of Iowa’s 24 million cultivated acres are moisture-deficient in topsoil and subsoil. A year ago the deficiency was nonexistent.
The USDA also has lowered the ratings for Iowa’s corn crop from 81 percent good to excellent two weeks ago to 67 percent as of last Sunday.
Roose said the 6 percent reduction in Iowa’s corn rating “was the biggest one-week reduction since 1988,” the year of Iowa’s last major drought.
Traders and agronomists worry that hot weather, combined with dry conditions, can hamper pollination and reduce yields.
While Iowa experienced a July heat wave in 2011, it occurred when soils had adequate moisture levels and Iowa was able to get a nation-leading yield of 172 bushels per acre for the 2011 crop.
This year, farmers warn, Iowa might not be so fortunate if enough rainfall doesn’t come before early next month.
Iowa received only half its normal rainfall in May and the June rainfall so far is more than an inch below the normal 1.84 inches for the first 12 days of the month, according to the state climatologist.
The government report did not reference increasingly dry conditions in Iowa and much of the corn belt.
While corn gained 44 cents per bushel last week on rising concerns about the dry conditions, the rainfall early Monday apparently has at least temporarily stayed those concerns.
Des Moines broker Tomm Pfitzenmaier noted the drop in corn prices Monday and said “the market is not really responding yet to the reports of declining crop conditions.”
Source: Argentine Beef Packers S.A.