June: Week Two —Fear of inflation is driving investor dollars into commodity markets. Fund traders and speculators, including trend traders, are moving into the buy side of grain, oilseed, fiber and energy markets taking long positions. This activity is increasing price volatility.
Planting progress is rapid but weather remains a market factor. Favorable rain and unfavorable rain are significant price moving factors.
Increasing oil prices support corn and soybean prices.
A good market strategy is to forward contract on market rallies.
Dollar cost averaging weekly or monthly sales of up to 60 percent of expected production over a three- to six-month time period. It may be a good time to lock in fuel and fertilizer prices.
Soybean sales for this market year exceed USDA estimates near 110 percent. If export sales and shipments continue at this pace, carryover supplies will diminish. Last year’s carryover stocks are expected to fall below 100 million bushels. USDA estimates 1.2 billion bushels of soybean exports. Planting is 70 percent complete but 10 percent behind average. Export inspections dropped below market expectations at 9 million bushels.
There is a temporary oversupply of soybeans on Chinese markets. China is rumored to be considering exports of stored soybeans as prices increase. Chine cancelled 4 million bushels of U.S. soybean imports. China has a drought affecting seedling soybeans.
Weekly soybean exports were less than markets anticipated at 2 million bushels. Soybean production estimates increased to over 3 billion bushels which is a 236 million bushel increase over the previous estimate. The yield average is assumed to be 42 bushels per acre. Soybean crush is expected to increase 1.75 billion bushels, reflecting increase biodiesel consumption.
Global soybean production is anticipated to increase 14 percent. Soybean markets remain fundamentally bullish. If carryover is below 300 million bushels that is a tight supply.
Farmer selling remains slow but steady. Corn planting is 95 percent complete. The eastern Corn Belt remains wet and prime planting time is passed. The current crop rating is 70 percent good to excellent and that is above average.
Export inspections were 32 million bushels and near market expectations.
Corn market fundamentals of supply and demand are turning positive. Corn acres are likely to drop as late-planted corn yields will also be lower. Production potential is limited and yield estimates were reduced 2 bushels per acre. USDA predicts production to drop by 11 million bushels to near 12 billion bushels. The assumed yield is 155 bushels per acre.
Ethanol production will increase 600 million gallons with a 15 percent fuel mix.
Weekly corn exports reached 26 million bushels. Shipments were also bullish at 34 million bushels.
Corn use estimates increased 3 percent with 4 billion bushels used for ethanol. Global production is expected to drop 17 percent. That lowers U. S. ending stocks by 28 percent to near 1 billion bushels. Carryover below a billion bushels is considered tight.
Falling dollar values make wheat and rice less expensive overseas. These commodities are more sensitive to dollar value than beans and corn because they are directly consumed by people. Lower dollar values make U.S. grain lower priced on world markets and exports increase.
The wheat fundamental is a large world supply that exceeds world demand. Planting is 89 percent complete for spring wheat and the crop condition is 73 percent good to excellent. Export inspections were half of last week. Wheat prices followed corn prices higher but that set the stage for correction midweek.
Canadian wheat is 90 percent planted. Ukraine and Russia have 20 million tons of winter wheat to sell. These nations are major competitors for export sales. The market year ended with 3 million bushels of weekly exports. The total export sales for the year did not achieve USDA predictions. Shipments were below market expectations. Wheat is overbought.
Rice market traders are concerned over reduced production in the United States. Late planting and fewer acres have limited production potential. USDA predicts yields will increase 3 percent and production of 224 million hundred weight. Ending stock estimates are predicted to be 39 million hundred weight increasing over 60 percent.
Thailand has 3.7 million tons of excess stored rice to intervene in case of famine. This supply is coming to market and will limit price potential. Lower dollar values stimulate rice exports. Rice fundamentals are price negative until exports from India, Vietnam and Thailand slow down.
Cotton markets respond directly to rising stock market prices. Pent-up textile demand is expected to correct this fall during holiday shopping. Current world supplies are ample if demand is steady. Increased demand will push prices upward. Inflation is another factor that will increase cotton prices. Cotton clothing and household goods may be less expensive now than at any time in the future.
Cumulative cotton export sales have reached 107 percent of USDA estimates. China has been selling cotton reserves but growers are shifting to beans worldwide. Open interest in cotton is only half of that at this time last year. Demand remains low but markets are positioning for lower supply and higher demand.
The crop is 80 percent planted. Production is anticipated at 13 million bales. Exports are predicted to drop 12 percent to 11 million bales. Ending stocks projections of 5.5 million bales are down 18 percent and below the 6 million bale average use. World supplies are anticipated to drop by 1.5 percent.