Market Perspective

The USDA’s Grain Stocks and Planting Intentions Report, which came out last Friday, was quite a shock to the market. After all the excessive rains the Midwest and corn belt experienced this spring, causing flooding and planting delays, the question was how many acres were lost. Well the answer, according to the report, was none. In fact acres were gained. Corn acres came in at 97.38 million vs. 97.28 million in the March 1st Stocks report. That represents the highest corn acreage since 1936. The market had been expecting a 2- to3-million-acre reduction. Wheat acres came in at 56.5 million – about one million acres higher than expected. Soybean acres came in at an all-time high of 77.7 million acres.

Grain stocks in the report actually came in on the low side of estimates, with June 1 wheat stocks at 718 million bushels – about 30 million less than expected. Corn stocks are 2.76 billion, or about 100 million less than expected. Soybean stocks also came in on the low side. But the stocks report was not enough to support the grain markets, except for the nearby corn and soybean contracts. Wheat futures moved sharply lower, with Chicago setting new life-of-contract lows. New-crop corn and soybean contracts also moved sharply lower, with corn being the weakest.

There is some debate about whether the acreage numbers are real, but USDA is standing by them, and at least for now the markets are reacting accordingly. The next report the market will be looking for will be the July Crop Production Report which will be out on July 11. In the meantime, weather will start to take center stage. Over the past three weeks, the weather has been mostly favorable, but the Western U.S. is expecting record heat over the next 10 days. The question is whether it will also slide over the central U.S.

Locally, it still looks like harvest is about three weeks away, after the last 10 days provided good moisture and moderate temperatures, which definitely benefited the crops. The next 10 days are forecast to be close to record highs, and that will speed up the ripening process and may do some damage to the spring crops.

White wheat is still trading at a steep discount to corn into the feed channels. A solution to the GMO issue is still being discussed. The Japanese visited the PNW this week, learning about the testing and logistics processes and doing their due diligence. A resolution to this is in the best interests of all the parties involved. Hopefully, one will be found soon.

Hope everyone has a good holiday weekend and a safe harvest.

Pearson Burke is the grain marketing manager for the Odessa Union Warehouse.