Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.
Beans Continue Correction
May 16, 2012
· Grains lower overnight led by struggling soybean market; Yesterday’s rally may have simply been a short-lived bounce during a much larger price correction
· Corn prices sharply higher yesterday despite mostly bearish weather and crop progress that is moving along swiftly; Old crop supplies still remain a major issue as basis levels remain extremely strong
· Traders exhibiting new concern regarding Euro Zone and Greece in particular; Euro currency has been soft to start this week
· Crude oil trading in the $91-93 range this morning; June contract traded over $110 in late February
· Old vs. New crop corn spreads holding together overnight; July-Nov soybeans rallied yesterday but traded against a significant downtrend line yesterday; More downside expected according to some chartists
· China demand rumors floating around yesterday as cause for rally; Traders will look for sales announcements at 8am
· Federal Reserve Bank of Chicago says farm land prices in IL, IA and IN were 19% in the first quarter vs. last year
· Ag economist from KS State looking for 2.0-2.5 million additional soybean acres in the US vs. March planting intentions; Some believe double-crop bean acreage will be significant
· Farmland values rose 19% in the first quarter in IL/IN/IA according to Chicago Fed; Non-irrigated land in KC Fed district rose 25%
· Opening calls lower for corn, beans; Lower for wheat
We look for continued downside in soybeans and continued upside in corn vs. soybean spreads. It’s tough to disagree with the K-State agronomist who looks for an additional 2.0+ million soybean acres given recent price spike.
Warm weather continues as May is expected to be 7th consecutive month of warmer-than-average weather in IL, IA and IN. Conditions remain favorable for the time being; however unusual warmth in June or July could present a problem for corn growers in particular. Disappointing yields the last 2 years were mainly the result of hot temps.
As always, call the office with questions or concerns.