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Market Commentary 07/21/16 8:34:06 PM
Market Commentary July 21, 2016
Corn
Corn price continues to loose ground as traders ignore the stressful effects of this week's heat wave. However, July rains have been very beneficial minimizing the heat stress due to wetter soils. Extended forecasts are now looking more favorable with normal and above-normal temperatures for most of the Corn Belt with above-normal precipitation in the Western Corn Belt next month. If this comes to fruition, corn's high crop ratings may continue. Crop conditions last week were rated 76% good/excellent leaning some to estimate corn yields possibly reaching 2-4 bushels above the 168 trendline yield. New crop corn futures pushed to another new contract low. This puts cash price around $2,75-$2.80 per bushel. A crop that had been profitable not long ago is now losing money big time. USDA said last week's export sales and shipments of corn totaled 13.6 million and 48.9 million bushels respectively, a neutral-to-bearish combination that makes it difficult for corn exports to reach USDA's 1.9-billion-bushel estimate by the end of August.
Soybeans
Futures prices fell to their lowest level in over two months on Wednesday, but were able to close a bit higher today. However, the trend is pointing down and could see some substantial downside price risk if corn and soybeans move back toward the usual price ratio of 2.4-1. Soybean price is still profitable, but that may not last long if weather if favorable. This week's heat wave continues to have no bullish effect on prices because it is only expected to last through Saturday and because there is more rain in the five-day forecast for the eastern Midwest and North Dakota. The latest forecast for August is also favorable for soybeans as they hit their pod-filling stage. USDA said that last week's export sales and shipments of soybeans totaled 11.9 million and 14.5 million bushels respectively; probably not enough for soybean exports to reach USDA's estimate of 1.795 billion bushels for 2015-16.
Wheat
September Chicago wheat closed almost a nickel higher Thursday, still trading in a highly bearish environment even though prices struggle to extend their lows. USDA said that last week's export sales and shipments of wheat totaled 17.6 million and 13.2 million bushels respectively, a neutral combination that has total exports in 2016-17 up 24% from a year ago. While that is a good start, it is hard to get too bullish, knowing that there is plenty of other wheat available around the world. New price lows were put in wheat futures yesterday leaving the bounce today much to be desired.
Dairy
USDA’s June Milk Production report showed milk production in the top 23 states up 1.6% from a year ago. Cow numbers increased 3,000 head from May and was 17,000 head more than a year ago. U.S. milk production increased 1.5% with cow numbers increasing 1,000 head from May. Total cow numbers are 5,000 head more than a year ago. Milk production per cow in the top 23 states averaged 1,926 pound, 26 pounds above June 2015. U.S. milk production per cow averaged 1,905 pounds, 27 pounds above a year ago. Second quarter milk production was 1.2% above the same period last year. There were 5 of the top 23 states which showed milk production declines. Utah declined 6.3%; Florida declined 4.5%; New Mexico declined 3.5%; Virginia declined 2.7%; and California was down 1.0%. South Dakota showed the greatest percentage gain with production up 6.6%; Michigan increased 5.4%; New York increased 4.2%; Texas gained 3.8%; Wisconsin increased 3.8%; and Kansas was up 3.5%. The rest of the states showed increases of less than 3.0%. Dairy cattle slaughter in June increased 9,700 head from May totaling 223,700 head which was 2,200 head more than a year ago. This was in the parameter of the usual and does not indicate any stepping up or slowing down of culling. Culling is likely taking place to make room for replacements and not due to low milk prices. USDA will release the June Cold Storage report on Friday which is expected to continue to show an increase of inventory. Another increase of cheese stocks will increase the already record high inventory. This news is not bullish to milk prices; however a tight fresh cheese market keeps prices supported.
Robin Schmahl
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