Corn: Since the market’s open on Monday morning, September corn futures have declined by $0.48. What exactly caused this decline? The short answer to that question is weather. The forecast for the Midwest has improved and the talk of La Nina has started to disappear. It is too early to say whether we have made a good corn crop or not. However, the weather premium seems to have left the market for now. I do think that there is validity to the thought that the heat has lowered the potential for the national yield. Once again, it is still early in the growing season.
As the weather forecast for the Midwest began to improve, speculative traders began to close out their long positions and move to the sidelines. Outside markets are also creating headwinds for grain futures. The fear of Britain leaving the European Union has caused traders to be more cautious and move to less risky investments. The vote is supposed to be announced tomorrow morning. This decision will impact the currency markets. If Britain does leave the European Union, the U.S. dollar will likely strengthen as a result. This would be bearish for U.S. grain exports. Local basis for new crop corn has remained unchanged from last week
Soybeans: Soybeans have traded lower this week for some of the same reasons as corn. Since the market’s open on Monday, November soybean futures have decreased by $0.39. The better than expected forecasts for key soybean growing regions are placing pressure on soybean prices. It is worth noting that the size of the soybean crop is largely dependent upon the rainfall that we receive in August. We have lost some of the weather premium in soybeans, but it is not too late for some of that to come back. The million dollar question is whether it will come back or not. As we all know, only time will tell. We can say that demand still remains strong for soybeans. Export figures continue to be ahead of USDA forecasts and soybean futures are no longer in overbought territory. Local basis for soybean remained unchanged from last week.
Wheat: July wheat futures have decreased by $0.26 since the market’s open on Monday morning. Harvest pressure is forcing wheat futures lower as supplies continue to swell from the new crop. The fundamentals of the wheat market remain unchanged. Global wheat supplies continue to be more than adequate to meet demand. That fact is reflected in the price of wheat futures. It just took harvest pressure to expose the truth of the matter. Local basis for new crop wheat remained unchanged from last week. Many producers in West Tennessee continue to report good yields in the range of 70 to 80 bushels per acre along with good test weights. Most producers that I speak with have finished with wheat harvest and are focused on spraying other crops and planting double crop soybeans.
Cotton: December cotton closed at 65.48. Exports figures for cotton showed signs of improvement from recent weeks. A portion of new sales were reported to be going to Pakistan and India. This reflects the continuing crop issues that both of these nations are experiencing with their own cotton crop. It will be interesting to see what this means for U.S. cotton prices in the long term. Cotton equities, or loan options, continue to range between $0.10 and $0.12 for new crop cotton in West Tennessee.
Take Home Message: This week in the commodity market is the perfect example of what I been talking about. The recent rally in grains presented selling opportunities for many producers. However, we have seen part of that rally go to the wayside this week. We have lost part of the weather premium that was built into the market. It is still early enough in the growing season that a weather premium can be reinstated. Of course, it will all be dependent upon the weather. Producers should keep an eye out for the June 30th USDA acreage and stocks report as it will be the next milestone for information on the size of the 2016 crop.
West Tennessee Grain Bids: Grain Newsletter 6-23-2016
