On the Verge of a Disaster? - Monday, 09 July 2012

“On the verge of a disaster” was the description given by Jerry Gulke explaining the current situation facing our crop conditions right now!  Over the past week  cities throughout the United States have set 3,000 new temperature records so it isn’t surprising that our grain market is positioned to experience a great deal of volatility.  Presently we are in the fourth week of a weather market; typically weather markets will last 4-6 weeks, which could indicate we might be nearing the top.  Making the judgment call of whether or not to sell new crop grain and if so how much can almost be overwhelming when confronted with all of the negative growing conditions and uncertainty of final yields this year.  Everyone wants to take advantage of the prices offered for the new crop but fear a shortfall in production and the ultimate costs that could be incurred if forced to buy bushels to fill those contracts, visit with your local purchaser and investigate what options are available in your area.  Roger Elmore, of Iowa State University, explained the customary amount of expected yield decline based on the current conditions of extreme heat along with dry soil and high temperatures during the pollination time frame.  According to his research after 4 days of those conditions you can expect a 1% yield loss, on day 5 add another 2% and on day 6 add an additional 4% to the total, this can mount up to a staggering loss in a very short period of time, especially when you look at the size of the area involved.  Several traders point out that this drought is quite similar to that in 1988 and remind us  the high that year came in July but Jerry Gulke cautions that corn prices could shoot dramatically higher, as we continue this unprecedented weather market. "We may be underestimating how high the price of corn could go."  Others believe that end users will step away from the market unable to profit at these prices.




This Wednesday, July 11th, the USDA will release the Supply and Demand Report.  Some private analysts believe that the USDA’s earlier estimate of 166 bushels per acre will fall to 155 bushels per acre, this would be a drop of 11 bushels per acre and would exceed the prior record set for the month of July, in July 1993,  4.7 bushels were taken off the expected national yield due to flooding.  Another important point to remember in all of this is exports, particularly to China.  The price of corn has now reached a level that makes if unaffordable for them to buy from the U.S. and they are switching to cheaper corn sources in South America.











The deadline for acreage reporting is this July 15th.  If you have not turned in your acres yet you must visit your local FSA office this week to meet the deadline.

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