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Is Corn Being Replaced By Wheat?

July 23, 2011
Bullish corn price fundamentals continue to mount.
  

 It seems that the market has done its job for at least the time being. Corn prices rose to significant enough levels to curb enough demand this summer that supplies appear to be adequate enough for the remainder of this marketing year. But that brings on a new set of problems and weather remains the determining factor in success or failure. 

"I think we’ve successfully rolled the problem of tight stocks from old crop to new crop. There is some discussion that we’re below trendline now, and I think we’ve priced in about 157-158/bu. acre national yield. If we keep the heat in here, as good as the crop is in Iowa, Illinois and Nebraska, we could hurt it at night like we did last year."
 
 
That concern is dark respiration and the fact that corn essentially get a chance to rest during the night when overnight temperatures remain too high. The plant’s energy is then spent trying to cool itself down rather than producing kernels of corn. That was the case last year and yields were lower than normal, Gulke says. It’s still too early to say if it will be a problem this year or not, but the heat wave of 2011 isn’t doing this crop any favors right now.  
 
There is anticipation that crop ratings will drop again on Monday and how much will they drop? They dropped 3% last week before we had that real hot weather this week."
 
Futures for all grains and soybeans moved mostly sideways in futures trading this week. Following rains late in the week, they opened lower on Friday, which would have brought prices for the week lower. The only old crop month remaining on the CBOT for corn did close lower for the week, but new crop closed mostly even on the week as fears over the heat dome mounted throughout trading on Friday, Gulke says.
 
Wheat prices and corn prices are becoming more tied as the limited corn supplies are causing livestock feeders to look at wheat as an alternative feed. "We’re talking to more of our clients recently who are shifting to wheat for feed," he says. "One of our clients who runs a mill in California said recently that we wouldn’t believe how much wheat they are importing for feed. And he says it didn’t start a week ago…it started 2-3 months ago."

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