Market Fundamentals Indicate Upside Potential Even With Normal Weather
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Market Commentary for 7/1/22
Corn
USDA Acreage Report
The USDA only increased corn acres by 500,000 from the March survey. This is not very bearish because the market has been pushing new crop corn values to levels encouraging a lot more corn acres be switched over from beans this spring. Evidently, wet weather in North Dakota and Ohio this spring prevented a lot more acres being switched to corn.
Weather
This week I drove through southern Minnesota on I-35 to Des Moines and west along I-80 to Lincoln. Iowa’s corn is at least one week behind normal, which should push pollination dates back until after July 20th. This means even after the long 3-day weekend, the 2-week weather forecasts will not yet reach the critical growing time period.
Current longer-term forecasts suggest weather should be close to normal though. If this happens, the current 177 yield projected by the USDA could be achieved. However, even with normal demand, that might not be as bearish as the market has been trading the last two weeks.
Ukraine
The 800 million bushels of corn still trapped in Ukraine will continue to be a factor on world demand. Brazil, Argentina, and the US are the only countries that have enough grain to help meet the global demand needs should Ukraine not be able to export grain by the Black Sea. If the US would be called upon to replace just 1/3 of the grain trapped in Ukraine, US carryout would be extremely tight and higher prices would be necessary to ration demand.
Bottomline For Corn
It seems the market has forgotten about the war in Ukraine and is instead focusing on worldwide recession fear. However, while outside markets are going down, ultimately everyone must still eat. Long term fundamentals for corn show potential for higher values.
Beans
USDA Acreage Report
USDA’s biggest surprise was planted bean acres dropping 2.7 million acres from the March survey projection.
Supply & Demand
If the country grows trendline yields and average demand can be achieved, carryout could drop to its tightest level since 2014.
Bottomline For Beans
This report should put a floor under bean prices until Christmas. The fundamental upside potential for beans looks very positive. With 2.7 million fewer acres planted compared to March projections means any August weather issues could cause a price explosion.
Prevent Plant Acres
The USDA announced they will resurvey Minnesota, North Dakota, and South Dakota again in July to reconfirm the acres planted. These survey results will become available in the August 12th report.
Want to read more by Jon Scheve? Check out recent articles:
It Was A Disappointing Week, A Lot Of Market Questions Remain
Basis? Spreads? War? Weather? Acres? Many Variables Still Impacting The Market
Is the Basis Market Indicating A Potential Corn Futures Rally?
Are Corn And Wheat Overvalued?
Are Beans Trying To Buy Acres Away From Corn?
Do Market Conditions Warrant $8 Old Crop Corn And $7.50 New Crop Corn?
Jon Scheve
Superior Feed Ingredients, LLC
