The trade obviously continues to focus on the weather. I am personally of the opinion that with additional rains being forecast for the northern half of the corn belt during the next few days, and the southern areas remaining blistering hot and dry, the trade is thoroughly confused. The recent heavy rains being reported in some areas is now a concern, but most traders are uncertain if they should buy into the potential yield problems being associated with the record high temps during the critical pollination stage with prices already at these extreme levels, or should they be selling at these extreme levels on hopes that the advancements in seed technology will help the plants pull through the extreme drought like conditions and produce above trend-line yields.
I am certainly a believer in technology, but I am also a "realist." With this being said, I see absolutely no way that we produce a crop above 156 bushels per acres. A reduction to 156 leaves ending stocks extremely tight. Throw on top of that the fact that we might eventually see even more crop abandonment being reported, and a reduction in both planted and harvested acres and I believe we remain extremely tight.
There is no debating the fact that the trade is currently confused by so many dynamics at play right now. Below are a few of the more interesting balls that are currently in the air.
The Current Wheat Dynamics
What type of quality issues a now popping up in the European wheat market? From what I am hearing there is starting to be more thoughts and concerns about the quality of the European wheat. If you remember, a few weeks back the world was worried about European quantity, now everyone seems to be worrying about the quality of the crop. Early on dry conditions, followed by heavy rains late, now has the trade concerned. Unfortunately no one really knows the extent of the issue.
Spring Wheat tour taking place right now in the US is uncovering much lower yields than the USDA had estimated. The trade is concerned about the eventual outcome, that should be reported today. Some discounting totals because they feel it is too early. My guess is they find better yields and the numbers start to look more like the USDA's. I would like to believe the numbers could push down closer to 40 bushels per acre, but I am thinking they jump up closer to 42 or 43 before it is all said and done. Still below last years mark of 46.5, but not as low as many had been thinking.
Black Sea or Russian wheat finally starting to....
The Current Corn Dynamics
The big question right now is obviously yields, and in particular how much, if any, has the overall US corn yield been affected by the extreme night time temps and extreme heat during the critical pollination and ear development stage. As I have been mentioning the past few sessions, I think we will be in the mid to low 150's. My guess right now is that we come in around 155. I could see myself dropping this number closer to 152 or 153 once I know more about the heat and the actual damage that has been done. It is still extremely early, so these numbers could certainly change, but for now this is my best guess.
How far will the corn tip back? Will "blanks" that are being reported affect overall yields and by how much? Still too early for me to guess, some are....
The Current Soybean Dynamics
How will overall soybean yields be affected by the recent hot temperatures? You have to believe there has already been some type of slight reduction in the top-end of the soybean yields. I am not saying anything major as of yet, but a move down into the 43 range is not out of the question. The next few weeks will be critical.
What will happen with overall soybean acres? In the USDA "re-survey" will they find more acres or fewer soybean acres planted? I am thinking we might see the USDA lower the number of corn acres planted, and actually raise the number of soybean acres planted. This could certainly change the outlook for ending stocks, and is something we must certainly prepare for.
How will Chinese demand affect overall US prices? With fewer soybean acres....
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