Crop Concerns Keep Corn and Bean Prices Near Historic Highs

July 27, 2012 01:42 AM

What Traders are Talking About:

Price strength overnight. Grain and soy futures were firmer overnight amid ongoing concerns with the crop. While scattered, light rains remain in the near-term forecast, traders are not convinced the precip will have any significant positive impact on the soybean crop. And the corn crop is too far along and has faced too much stress to be helped.

* Forecast offers hope of scattered rains, but no widespread relief. Some areas of the Corn Belt will receive scattered rains into early next week based on current forecast models, although coverage levels and amounts remain fairly uncertain. There's also a wide range of precip expectations among weather forecasters from the middle of next week through the end of the 15-day window. But even the most optimistic forecasts aren't calling for coverage levels and rainfall amounts to come close to ending the drought conditions.

The long and short of it: Traders must decide if they feel forecasts for scattered rains are enough to go home flat to short the market or if they will continue to stick with their stance of adding long positions ahead of the weekend. Midday weather updates will be the deciding factor.

* Corn, beans working on weekly losses. For the first time since the strong price surge began in mid-June, corn and soybean futures are at risk of a lower close for the week. Over the past six weeks, corn futures have surged more than $3 and soybeans nearly $4 without much pause. To avoid a lower weekly close, Sept. corn futures must finish today above $8.24 1/2; Dec. corn above $7.95 3/4. For soybeans, Aug. futures must close above $17.57 1/2 and Nov. futures above $16.86 1/4 to avoid a lower weekly close.

The long and short of it: A lower weekly close does not signal a top has been posted. But it's a hint topping action may be in the works.

* Spring wheat crop escapes much of heat, moisture stress. Scouts on the Wheat Quality Council HRS wheat tour found better yield potential than both year-ago and the five-year average after sampling fields throughout North Dakota, northern South Dakota and western Minnesota. The tour average yield on samples taken was 44.9 bu. per acre, up from a tour average of 41.5 Bu per acre last year and a five-year tour average of 41.7 Bu per acre. Samples from durum wheat fields averaged 42.4 Bu per acre compared with 31.8 Bu per acre last year and on average. In addition to strong yields, scouts expect a high-quality crop. Because of a very quick start and favorable conditions early in the growing season, the spring wheat crop was able avoid most of the ill effects of the drought conditions, which have been spreading northwesterly across the country's midsection.

The long and short of it: Barring a late-season hail storm, the spring wheat crop is poised to be high-yielding and high quality. Demand for U.S. spring wheat should be strong as global supplies of high-quality wheat are tightening.


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