Thursday, April 22, 2010

Grain Market Update

Over the past few weeks, new crop corn and soybean prices have shown some gains. December 2010 corn is trading in the $3.75 to $3.95 per bushel range and November 2010 soybeans are trading in the $9.20 to $9.60 per bushel range. Price movements have been a function of outside price pressure stemming from both the financial industry and energy market. Now that we are entering the growing season, market prices will begin to be a function of crop size.
Producers throughout the corn belt are making significant strides in planting this year’s corn crop. From the United States Department of Agriculture (USDA) Prospective Plantings report, corn producer’s plan on an additional 3% more acreage over last year. The National Agricultural Statistics Service (NASS) reports through the week of April 18th that 19 % of the corn crop has been planted. This is significantly higher than the previous week where only 3% of the corn crop had been planted. When compared to a year ago, only 5% had been planted. Producers are well ahead on corn planting and look to continue to make significant strides over the next few weeks.
The USDA will release their supply and use estimates for 2009/2010 on May 11th. This report will include the first projections of supply and use for the 2010/2011. For the current crop year, 2009/2010 corn ending stocks were increased 100 million bushels from March to April. This increase was driven by a 100 million bushel decrease in feed and residual. Corn ending stocks continue to slowly increase and are projected at 226 million bushels over 2008/2009 crop year.
On the soybean side, plantings have not yet started. The USDA planting intentions report indicates less than 1% more acreage than last year. Soybean supply and use estimates for 2009/2010 were not changed between the March and April report. Ending stocks are about 75% of their ten year average and have been increasing since 2008. However, foreign ending stocks were increased by a little over 4% from the March report.
For wheat, crop condition is rated at 69% good to excellent. This is well above last year at this time where 43% was rated at good to excellent. Fundamentally, wheat is very bearish due to the very large carry over ( around 950 million bushels, up 46% from last year) . This can be seen in the level of the carry offered in the CMEGroup wheat contract. A storage hedge from the July contract to the December would return $0.44 per bushel. Going from July to March of 2011 would return $0.71 per bushel. To determine net cost, one would take the benefit less interest on money, shrinkage, in-out costs, and any other costs associated with storage.
As we move through the planting season and into the growing season, expect prices to continue to be influenced by growing conditions and economic events. Price volatility makes it difficult to determine when one should be making sales. I recommend a pricing plan that includes, but is not limited to, knowing what your break-even price is, making harvest sales in small percentages when prices rise above the break-even, monitoring basis to take advantage of favorable moves, and leaving around 30% of expected production to be priced during the primary growing season, around July. (Cory Walters, email:

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