Prices and Field Conditions - Monday, 23 June 2014

Next Monday, June 30th, will be the USDA’s stocks and acreage updates.  Traders will spend most of this week positioning for these reports.  Many analysts expect it to show higher inventories on corn than a year ago but tighter supplies for soybeans.  The biggest surprise is expected in the acreage number, since the March report many have suggested that this year’s acreage number may have been underestimated, this report next Monday may verify this speculation.

With so many mixed signals right now, decision making with any degree of confidence is nearly impossible.  Heavy rains over larger portions of the upper Midwest have many fields experiencing at least some degree of flooding or drown-outs.  Some areas along the Iowa, Nebraska border reported nearly 8 inches of rain over this past weekend alone.  As producers, our emotions tell us that such circumstances as this and similar situations heard all around the upper Midwest should drive the prices higher.  The trade, on the other-hand is much more objective and looks at the overall situation and tries to determine if the yield loss in these limited areas out- weighs the overall benefit of the rainfall.  The region of Iowa that was hardest hit producers about 750 million bushels of corn per year.  When you calculate out a possible 10% loss on those acres and subtract that from the national yield we still come out with a crop of 13.86 billion bushels. 

Obviously the trade will be watching to see how the USDA’s crop conditions report reads today, we know that problems are widespread in Iowa, Minnesota, South Dakota and portions of Nebraska, that can’t be denied.  The concern is though that a 1-2 million acre loss in production in these states may not be enough to out-weigh the perfect conditions found in the rest of the corn-belt and the current supply levels that seem to have lost their demand source.

 

Another force working against higher prices is timing.  An old “rule of thumb” that many producers through the years have practiced is “no unpriced corn or soybeans held beyond July 1st”.  Track records show that there is a tendency for new crop prices to drift lower during the summer and partially due to this trend, downward movements in cash prices can often be found as well.  Certainly we know that this isn’t always the case, the summer of 2012 saw new crop prices continue to rise as the summer and drought conditions progressed.  The 2013 summer season though brought us $2.00 lower on corn and $3.00 lower on soybeans from early July to harvest. 

The escalating situations overseas continue.  The state of affairs in the Ukraine that seemed to be improving is again deteriorating.  The President of Ukraine has ordered a cease fire until this Friday, June 27th.  This means that Ukrainian forces will not fire unless fired upon and pro-Russian separatists have until then to disarm.  The separatists seem uninterested in the cease-fire and have continued to attack more military bases and posts over the past several days.

In addition to the tensions in Ukraine, Iraq has been struggling with ISIS militants continued attacks.  The group managed to gain control over 4 more towns over the weekend.  These towns that were seized over the weekend indicate to military analysts here that the next target will be the city of Haditha.  This city has a major hydroelectric plant and if it and the nearby dam are destroyed, the country’s power grid could be crippled and widespread flooding could also result.  So why does all of this matter to the U.S.?  The ongoing destabilization of the Middle East could alter the optimistic attitudes that have helped move U.S. stocks to new record levels and cause further spikes in gas prices.  Currently gas prices are at their highest levels since 2008 and analysts think we could see an additional 10-15% increase in the weeks ahead.  The former deputy director of the CIA has said that “the Middle East is now the most dangerous it’s been since the 1973 war.”

The weather continues to be the focal point.  New information out indicates that the arrival of the El Niño weather pattern may be pushed back further into the fall.  Some models have shown a slow-down in the change of ocean temperatures which hasn’t indicated a cancellation of the pattern developing but has led forecasters to feel it may not arrive until closer to September or October…stay tuned! 

The good news is current forecasts for the Midwest show temperatures in the high 80’s and low 90’s for the next few days which will certainly raise humidity levels and also help to dry out some saturated fields.  The bad news is that some forecasts are indicating the arrival of even more rain beginning Thursday.

 

Please visit your county FSA office as soon as you are finished planting to certify your acres.  Be sure you look over the maps for accuracy and send all copies to your insurance agent to update your policy with your plant dates.  July 15 Deadline is FAST approaching so take advantage of these “wet” days to have this completed.  Do not wait.

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